John and Paul are friends from university who decided to start a business to sell modified Swiss watches. They sell popular modified watches including "Yellow Submarine" and "Eleanor Rigby". They are also making a prototype which they shall name "Norwegian Wood".

George is a designer who worked with John and Paul to design the watches. George was to be paid $3,000 for the Yellow Submarine design and a further $4,000 for the Eleanor Rigbydesign. George wants to be paid $8,000 for the Norwegian Wood design and a share of the business.

After their initial market research, John and Paul are confident that the Norwegian Wood design will be their best-selling watch. They need initial capital to ensure that this time they can produce larger quantities of the watch for sale. John's friend Ringo agrees to provide them with the capital they require in exchange for a share of the business.

John and Paul now seek your advice on which form of business they should undertake.

1. Identify the business organization of your choice with a brief description, the structure you are proposing. Your answer should take into consideration the following:-

1. John and Paul each contributed $15,000 to start the business;
2. George has not received any payment for the design of all 3 watches;
3. Ringo's has agreed to provide capital amounting to $55,000;
4. John and Paul will run operations and George will do design the watches; and
5. Ringo has clearly stated that he does not want to take part in the business and wants assurances that he will be repaid his capital in 3 years.

2. Taking into consideration the facts provided below, explain how it may be dealt with in the business organization of your choice.

• They plan to release new models such as "Penny Lane" and "Hey Jude". In order to do so, they realise they need a further injection of capital amounting to $150,000. They want to know the options in raising funds for the new designs.

• They sell out the Yellow Submarine and Eleanor Rigby watches, earning a profit of more than $20,000. However, due to a faulty watch, they are forced to withdraw the Yellow Submarine watch and refund their customers. The initial profits are wiped out and their liability is now $60,000.

• Brian, a well-known businessman, wants to buy a share of the business. He is willing to make a capital contribution of $300,000. He wants to know what he can expect in return.