As manager of theOUTAWAYINN, you are considering ways to increase your business in the dog days of August. Nothing seems to work all that well when one day the co-owner of the local dirt bike store suggests forming theOUTAWAYANNUAL BIKE RALLY AND RACE. Of course, he has no money to promote the event but is willing to invest sweat equity (his time). You are not able to come up with the funds for promotion (marketing) of the event, but are willing to use the hotel as Official Headquarters at no charge.

Finally, the local dirt bike shop owner finds a Canadian (Individual) who is willing to front the expenses ($5,000) for the promotion of the event. He does not want to have any involvement in the event and is very concerned that hewill not sufferany potential liability except his investment.

You agree to split the profits from the event on an equal basis. You are concerned about the business skills of the dirt bike shop co-owner. You want to make sure that you have control and full responsibility for the business affairs of the event. You want to structure the deal such that the biker shop co-owner will be restricted to marketing. The three parties are the dirt bike store (which is a partnership between two brothers), the Canadian who is supplying the money (as anindividual) and theOUTAWAYINN (which is a subchapter S corporation).

1.How would you structure the new venture?

2.Should it be a contract relationship? What are the pros and cons of this?

3.Should you form a new entity? If so, should it be a partnership, an LLP, and LLC, a "C" corporation, or an "S" corporation? Why?