Case Study 7.1
Preparing a Proper Legal
Foundation: A Start-Up Fable
Team members
Mario
MA1N0225
Maria
MA1N0229
Oogi
MA1N0216
Introduction
Jack Peterson and Sarah Jones planed to locate and
operate 10 kiosk and malls and other high traffic areas to
sell accessories for Apple iPods and iPhones.
 They created a series of short videos helping users learn
how to make better use of their iPods and iPhone and
sold them to the customer via streaming video on Jack
and Sarah’s website.
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Intro – the very begning
Jack and Sarah took enterpreneurship course at
university and got the initial business plan for iUser
Accessories.
 Later, develop the plan on business planning
classes.
 They won the university award for the best
business plan ($7,500 in cash).

Introduction (Cont…)
Registered their name as
www.iuseraccessories.com on GoDaddy.com.
 Completed their feasibility analysis with firstly
developed a concept statement and
distributed it to total of 16 people, including
professor, electronics store owners, iPod and
iPhone users, and the parents of young iPod
users.
 Concept statment participants inspired them
about video streaming over the Internet and
giving customers codes to the videos.
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Introduction (Cont…)
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They surveyed their target market (410 people) age 15 to
35 years old.
52% of their target market were already Apple users or
were planning to buy Apple products soon.
The result affirmed that majority of their target market
don’t realize the number of iPod and iPhone accessories
that exist, let alone know where to get them.
Introduction (Cont…)
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Completed also one and three-year proforma financial
statements, which demonstrated the potential
viability of their business. They have commitments for
$66,000 of funding from friends and family.
Projected salary for each of them - $32,000 per year
(more than 40 working hours a week.
And the last important steps was they arranged and
discussed with Attorney about their intellectual
property and forms of business ownership.
Preparing for the Meeting with the
Attorney
At university they learned that it’s crucial to plan
carefully the time with an attorney.
 Before the meeting they learned about forms of
business ownership, and other legal issues .
 They prapared the concise list of issues to raise.
 The meeting was to be devoted to general legal
issuess, the discussion of intelectual property was
postponed to next meeting with other attorney.

Question 1
Complete Jack and Sarah’s list for them,
including the issues you think they will place
on the list along with their
recommendations. Which of the issues do
you think will stimulate the most discussion
with the attorney, and which issues do you
think will stimulate the least?
List of Legal Issues discuss with attorney
Issues
Jack and Sarah’s
Recommendation
Notes
Choosing an
attorney
Select an attorney early
Intellectual Property
-It is important for an entrepreneur to select
an attorney as early as possible when
developing a business venture
-For issues dealing with intellectual property
(patents, trademarks, and copyrights) it is
essential to use a n attorney who specializes
in this field.
Ethically
departing from
an employer
Behave in a professional
manner
Employment contracts
Founder
agreement
Agreements between us
Shareholder’s agreement- is a written
document that deals with issues such as the
relative split of equity among the founders of
the firm, how individual founders will be
sweet equity.
List of Legal Issues discuss with attorney
Issues
Jack and Sarah’s
Recommendation
Notes
Litigation
Meet all contractual obligations
Set standards
Get everything in writing
It is important to meet all contractual
obligations on time. This includes paying
vendors, contractors, and employees as
agreed, and delivering goods or services
as promised. Many business disputes
arise because of lack of a written
agreement do not anticipate potential
areas of dispute.
Choosing a form
of business
ownership
Sole proprietorship,
Partnership, corporations and
limited liability companies.
Tax
Multiple- member taxed like
partnership
Question 2
Make a list of the things you think Jack and
Sarah did right in preparing for their
meeting with the attorney?
Jack and Sarah had a good preparation with
their attorney:
oJack and Sarah tried to find a good attorney.
oThey planned to several evenings at local
bookstore, looking at books that deal with
forms of business ownership and other legal
issues and making a concise list of issues
discuss with attorney.
oThey prepared their business plan.
oThey planned carefully the time they spend
with attorney.
Question 3
Comment on the product feasibility analysis
that Jack & Sarah completed. Do you think
the way Jack and Sarah approached this task
was appropriate and sufficient?
PRODUCT FEASIBILITY ANALYSIS
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Developed a concept statement and feasibility study
then distributed it to a total of 16 peoples.
Responses received: Positive
Idea: To use iPod and iPhones better, via streaming
videos over the internet, providing customers
access codes to retrieve the videos.
Surveyed 410 people in a more conventional
manner.
Target Market age average: 20 years old
Process of Distribution: Approaches their
target market, then ask them to complete
the survey.
 Looked for help from their marketing
professors for their survey’s design.
 Survey design: Large Population
 52% of the target market own an iPod and
iPhone.

Question 4
What advantages do Jack and Sarah have
starting iUser Accessories together, rather
than one of them starting it as a sole
entrepreneur? What challenges do you
think Jack and Sarah will have keeping their
partnership together?
Advantages
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Jack and Sarah completed one and three year pro
forma financial statements, which demonstrated
the potential viability of their business.
They have commitments of funding from friends
and family.
They are fortunate in that they are able to each
contribute $3,000 to the business personally and
were able to gain commitments of $30,000 each
from their respective groups of friends and family.
They had emailed the attorney their list of issues
along with their recommendations.
The attorney greeted them with a firm handshake
and opened a file labeled “iUser Accessories, Jack
Peterson and Sarah Jones”, made it seem like their
company was already real.
Challenges
Disagreements can occur, because decision
making among the partners is shared.
 The liquidity of each partner’s investment is
low.
 The business lies on the skills and abilities of a
fixed number of partner
 Liability on the part of each partner is
unlimited.
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Thank you
for
your
attention