Luke and Raina have been working with Sandra Higgins of Envision Business Labs to develop a business plan for their team management system. They are delighted that industry analysts have given thumbs-up to their plan. Buoyed by favourable feedback, the team decided to engage the services of a marketing firm to assist with a detailed marketing strategy. Initial results from marketing firm's consumer surveys indicate there is, indeed, significant demand for the team management system in a wide range of industries.

Anxious to proceed with the plan, Luke and Raina have made an appointment with a lawyer to assist with incorporating a company with a head office in Toronto. They have a name, Time-in Team Management Incorporated (Time-in Inc.,), and they plan to be equal shareholders given that they will both continue to be involved in the management and expansion of the business. However, Luke and Raina are unsure how to structure an investor's involvement in the business. Roger will not be participating in the day-to-day operations, but will be giving advice and contributing $200 000 in capital.

The only major problem revealed by the business plan - and it is a significant one - is that the business is underfunded. Sandra informs them that they will need an additional $350,000 to fund the expansion into other countries and markets. Luke is not too concerned about this news, in part because he has read in an article in The Globe and Mail on 10 of Canada's most successful crowdfunding campaigns. "I can crowdfund. No problem." Says Luke. "I'll make a short video on our team management system, upload it on the internet, and have people purchase shares in the business. And if that does not work, I will simply sell some shares to friends and family."

Based on the above facts, answer the questions below.

1. How is a corporation formed, and what factors should Luke and Raina consider in forming a corporation? (5 marks)

2. What options are available for involving Roger in the business? (5 marks)

3. What factors should Luke and Raina consider in seeking to raise money by selling shares? (5 marks)