Chao and Simpson come to you for legal advice in connection with setting up their business that develops artificialintelligence tools for e-commerce companies. Chao has a PhD. in software engineering and as developed severalalgorithms (which she has patented) that allow online sellers to more accurately predict the needs and interests oftheir customers based on their search histories and past buying habits on other websites. Simpson has an MBA fromseattle university and has held several senior executive positions at venture-backed startups. About six months ago, Chao and Simpson decided to try to commercialize the AI technology. Chao has personallysigned an agreement with a software development company to implement her ideas and has been paying for theirservices out of her own pocket. Simpson located some relatively inexpensive office space and has personally signeda Letter of Intent to lease the space and put down a deposit using his personal funds. Both Chao and Simpson havetalked with several friends and associates about joining the venture. Chao and Simpson have been friends since theirundergrad days and believe they are the perfect duo to pull this off. They estimate that commercializing Chao's ideas will take significant amount of time and resources and so outsideinvestors (angels, venture capitalists, most likely) will be critical to the venture's success. They also need to find away to compensate and incentivize their future employees while operating on a low budget and minimizing salarycosts. Chao and Simpson both reside in Washington state, but they have heard that, to be taken seriously by investors, theyshould organize in Delaware. They want to share equally in the profits and losses of the enterprise and also want tounderstand their funding options going forward. Chao and Simpson have come to your law firm asking for advice and help in formally setting up their businessenterprise. The senior partner has assigned the matter to you.

Questions:

A) Please identify the business form under which they are currently operating as and recommend the typeof business form that would best suit their needs going forward. Be sure to explain why you are recommending this form type and how it its capital and tax structure will work. B) What documents need to be drafted and/or filed to meet the client's initial goals? C) Explain the possible funding options available to them given the groups they want to raise money from. D) How should Chao and Simpson deal with the development and lease commitments that they have personally signed for? E) Would you be willing to take equity in lieu of fees for your services? Why or why not? If you chose totake equity, what should you do to make sure you comply with your ethical obligations?