Pretend that you are the owner of your own accounting firm. Your firm specializes in the start-up market. You advise clients on how to set up a new business including hiring and payroll. Since many of your clients are start-ups, they generally do not have ready cash to pay your fee. You have to make a living, though, and you have to pay your employees. In order to get paid, you have developed the following strategy. And, since you have a number of years of experience, you can usually tell which clients are going to be successful.

You generally assess the client and do one of the following before starting work:

1. Demand payment up front
2. Accept a written note payable which is due within one year
3. Accept stock in the company in lieu of payment

Here are the client files that are on your desk right now:

1. Steven Moore. Steven is a dog lover and a college sophomore. Steven has always loved tinkering with things. Steven has developed a dog collar that assesses a dogs movements and will notify the owners iPhone or iWatch if the dog needs to go outside to well, you know.

Steven thinks that this product will be super-hot among people who are training dogs. Imagine if you knew exactly when to take the new puppy outside! It is a game changer. And, there could be alternative uses. People who are at work could potentially link the collar to a smart house system, like the Amazon Echo, so that the back door would open itself for the dog.

Steven is going to need a lot of seed capital. He envisions partnering with a company like Amazon or maybe going public. The device could be sold around the world.

1. (no points) Which payment option are you going to offer Steven?

2. (3 points) Steven has hired you to provide consulting only. Last year, Steven prepared his own tax return using TurboTax and he said that he would handle this years tax filings. What document should you prepare to memorialize your agreement with Steven in order to protect yourself?

3. (8 points) Steven provided PDF documents with some of his trade secret information to you so that you could do your consulting work. Those documents are on your laptop and server. Name some types of protections that your accounting firm should have to protect against cyber security breaches.

4. (3 points) Steven is concerned about disclosures of his trade secret and private information. Your agreement includes a confidentiality provision. There is also a special Texas law that protects confidential information provided to an accountant. What is that law?

5. (10 points) Steven needs to know which entity type would be best for his new business. Recommend one type of entity and explain why that entity type would best meet Stevens needs and concerns.

His concerns are:

#1 entity must be accommodating to investors. He needs to be able to sell interests in the company and to raise capital.

#2 entity must provide a lot of liability protection. What if a dog wearing one of the collars bites someone? Even if the collar had nothing to do with it, Steven could get sued.

Steven does not have solid opinions about the other things. He does not plan to manufacture the devices himself. In fact, he is pretty much depending on licensing the right to manufacture the device to other companies. Amazon, for example, could manufacture the device under their brand as long as Steven gets a cut of the profits.