Subject Course: Business Law For this case study, craft a professional email, ap
ID: 388223 • Letter: S
Question
Subject Course: Business Law
For this case study, craft a professional email, appropriate in format, tone, and content, to send to your clients Fred and Sally, with your preliminary thoughts on the issues within. Your email should illustrate the issues and relevant law, apply the facts, and support your conclusions with regard to each issue. Always remember to be clear, kind, and professional in your communications. Case Study 1 Fred is well known in his town for his homeopathic cough syrup. After years of encouragement, he has decided to take his miracle cough remedy to market as “Fred’s Miracle Cough Syrup.” While his cough syrup is homeopathic, one of the key ingredients causes a severe reaction when taken in conjunction with aspirin. Fred plans to make and bottle his cough syrup in an outbuilding on the family farm. His son, Sam, has been raving to the locals about his father’s cough syrup for years, and the local drug store and grocer have contacted Fred to place orders as a result. Sam also intends to approach several national chains in an effort to secure supply contracts for Fred’s cough syrup. Fred has asked Sam to assist him with deliveries, as Sam has a van. Fred would like Sam to be involved with the business as an employee initially, with the option of making him a partial owner at a later time. Fred and his wife Sally have two children, Sam and Lilly. Both live in cabins on the family farm with their spouses and children. Fred and Sally engage you as their attorney to assist with the formation of the new business, including determining the appropriate business entity type, management issues, product liability issues, and estate planning for both the business and family property. After your initial meeting, you identify and research the following issues. Specifically, the following critical elements must be addressed:
1. Identify potential estate planning issues with regard to the business and the family farm. Justify each potential issue.
2. What estate planning vehicles are available to Fred and Sally should they desire to transfer ownership in the business and family farm, respectively, to Sam and Lilly equally?
3. What are the advantages and disadvantages to each?
4. Applying your analysis of the issues above, which type of business entity do you recommend for Fred’s Miracle Cough Syrup and why?
Explanation / Answer
Ans 1 -
Upon careful examination multiple potential estate planning issues have surfaced, including -
a) Continuous approval based nature of business - The business is providing medicines and a series of regulatory compliances and approvals are required for selling such products including licensing and patenting norms attached with the product. FDA approval of such drugs have known to be taking over 2-3 years for individual drugs. This increases the business cost and riskiness involved in the business.
b) Business and farm are inseparable - The business is being currently proposed to be run from the family farm itself. Thus making a divide of business to one and farm to another may not be the best couse of action. Necessary clauses have to be incorporated in the estate planning document to ensure avoiding potential conflicts between the beneficiaries.
c) Writing Will - Writing and notarising a will document is an essential step in estate planning
d) Appointing right executor
e) Planning for estate taxes
f) Using life insurance in estate planning
Ans 2 -
The planning vehicles available to Fred and Sally, that are relevant to the case at hand are -
a) Wills
b) Trusts
c) Advance Directives
d) FLPs
Ans 3 -
a) Wills - Advantages - most common, simplest estate planning tool
Disadvantages - must comply with the local laws and the state-of-land rules, may be difficult to enforce, may involve legal counsel's efforts to successfully carry out the will in an often long and tedious process.
b) Trusts - Advantages - offers a high degree of control over management and disposition of assets, ensures smoother transfer of property without much legal hassle
Disadvantages - Elaborate process of setting up a trust, additional charges involving the management fees of the trust and the appointment of trustees
c) Advance directives - Advantages - Also termed as living will, specific final arrangements, such as whether to be buried or cremated, can also form part of the documents,
Disadvantages - may be difficult to enforce, may involve legal counsel's efforts to successfully carry out the will in an often long and tedious process.
d) FLPs - Advantages - Limited Partners have no ability to control, direct, or otherwise influence the operations of the FLP, allow family members with aligned interests to pool resources, thus lowering legal, accounting, and investing costs, LPs have no rights of control, they cannot liquidate their partnership interest, tax favourable
Disadvantages - Buniess has be structured and represented along with farm as an FLP, Initially an elongated tedeious process has to be followed.
Ans 4 -
The FLP form of estate planning measure seems most desirable in the current scenrio. The following are the major reasons why -
Limited Partners have no ability to control, direct, or otherwise influence the operations of the FLP, allow family members with aligned interests to pool resources, thus lowering legal, accounting, and investing costs, LPs have no rights of control, they cannot liquidate their partnership interest, tax favourable. More reliable tool for the succession planning than Will and Living Wills which usually take years before completing the transfers.