Samantha Taylor and Julie Cramer have recently developed a new kind of makeup that adjusts automatically to match the user’s skin tone. It will no longer be necessary for women to try a number of different shades in order to find the perfect shade. Samantha and Julie have decided that they will form a business called Just for You (“JFY) in order to manufacture and sell this new makeup.

JFY will probably not be profitable for at least a few years, but they think that by the 4 or 5^th year, they will start to turn a profit. The business will also need to borrow funds from the bank in order to purchase office and warehouse space. It is their intention to outsource the production of the makeup, and so they will not need any of their own manufacturing space. Samantha and Julie have both quit their full time jobs in order to be actively involved in the activities of the business.

Another thing that they mentioned to you is that they will need liability protection, in case a customer turns out to be allergic or otherwise harmed by the new makeup.

Samantha and Julie have come to you to ask your advice on what type of entity they should use for this new venture.

Required:

Prepare a client letter discussing Samantha’s and Julie’s options in terms of the types of entities they might want to consider for this business and why. Make sure you identify significant tax and non-tax issues that may differ across entity types and discuss how they are relevant to the choice of entity decision. Once you have described their various options, present them with your recommendation.

Client letter guidelines and an example of a client letter are located in the Course Resources section of Moodle, in addition to the effective writing rubric

Below is an example of a Client Letter my professor gave us

Writing Assignment #2

Samantha Taylor and Julie Cramer have recently developed a new kind of makeup that adjusts automatically to match the user’s skin tone. It will no longer be necessary for women to try a number of different shades in order to find the perfect shade. Samantha and Julie have decided that they will form a business called Just for You (“JFY) in order to manufacture and sell this new makeup.

JFY will probably not be profitable for at least a few years, but they think that by the 4 or 5^th year, they will start to turn a profit. The business will also need to borrow funds from the bank in order to purchase office and warehouse space. It is their intention to outsource the production of the makeup, and so they will not need any of their own manufacturing space. Samantha and Julie have both quit their full time jobs in order to be actively involved in the activities of the business.

Another thing that they mentioned to you is that they will need liability protection, in case a customer turns out to be allergic or otherwise harmed by the new makeup.

Samantha and Julie have come to you to ask your advice on what type of entity they should use for this new venture.

Required:

Prepare a client letter discussing Samantha’s and Julie’s options in terms of the types of entities they might want to consider for this business and why. Make sure you identify significant tax and non-tax issues that may differ across entity types and discuss how they are relevant to the choice of entity decision. Once you have described their various options, present them with your recommendation.

Client letter guidelines and an example of a client letter are located in the Course Resources section of Moodle, in addition to the effective writing rubric