1. Under what form of business do you suggest they operate?

2. What steps should they take to create such an entity?

3. How should they obtain the funding necessary for their first year of operation?

4. How should they manage the business?

5. Outline the principal terms of an agreement that reflects the intentions of Jin, Kae, and any other participants or investors, on the issues of ownership, management, compensation, sharing of profits and losses, dissociation and buy-out.

Jin is an accountant. Nuankae is a sous chef at a successful Spanish restaurant on E. 68th Street, called “Que Lastima.” Jin and Nuankae (who likes to be called “Kae”) both enjoy Louisiana cuisine and met at a cooking class. They decide to open a small restaurant on W. 68th Street, called “Kae-Jin Cookin.’”

Jin and Kae meet with you to seek advice on how to establish their business. They do not expect to earn a profit in the first year or two of operation. Their principal expenses will be rent, salaries and food purchases. They expect to require about $200,000 to cover expenses over income for the first year of operation. Jin has $100,000 available; Kae $50,000. They can make up the $50,000 shortfall either through a bank loan or from Kae’s uncle, “Dutch,” a retired wine importer. Dutch is willing to provide these funds as either a loan or investment. Jin believes that the bank which is willing to make the loan may require personal guarantees from Jin and Kae.

Kae plans to quit her job at Que Lastima and can devote 100% of her time to managing the restaurant. Jin wants to continue working as an accountant but is willing to handle the restaurant’s financial affairs and offer recipes.

Jin and Kae and ask you how they should proceed. Write a short memorandum addressing the following: