BUSI 301 Week 8 Business Plan Paper Example

Grounded Mobile Coffee, LLC: A Business Plan Proposal Built Around Its Legal Environment

Executive Summary

Grounded Mobile Coffee, LLC will operate a single espresso trailer serving farmers markets, office parks and private events in a mid-sized city. The two founders, both experienced baristas, will invest $30,000 of their own savings and borrow $55,000 through a bank loan to cover startup costs of about $85,000. This proposal describes the business and, because a business is shaped as much by its legal environment as by its market, explains the legal decisions behind its structure, contracts, brand, staffing and risk management.

Business Description

The trailer will serve espresso drinks, brewed coffee and a small selection of baked goods from a local bakery. Weekday mornings will be spent at two office parks under agreements with property managers, Saturdays at the city's two largest farmers markets, and evenings and Sundays at booked events such as weddings and church gatherings. The founders' advantage is quality and reliability: drinks made with locally roasted beans, served quickly by people who know regular customers by name.

Legal Form

The founders will organize the business as a limited liability company. Melvin (2018) explains that an LLC combines the limited liability of a corporation, protecting owners' personal assets from most business debts and lawsuits, with the flexibility and pass-through taxation of a partnership. A general partnership would expose both founders' homes and savings to claims arising from the business, which is unacceptable for a food business that serves the public. A corporation would add formalities and, as a C corporation, double taxation. A sole proprietorship was not an option because there are two owners, and a limited partnership would require one founder to accept unlimited liability as the general partner. If Grounded becomes profitable enough, the founders can later ask the IRS to tax the LLC as an S corporation, a choice an accountant can evaluate in year two. The Small Business Administration notes that an LLC suits owners who want liability protection with fewer formalities than a corporation (U.S. Small Business Administration, n.d.). The founders will adopt a written operating agreement that sets out ownership shares, management duties, how profits are divided, what happens if one founder wants to leave, and how disputes will be resolved.

Licenses and Permits

Paperwork comes first: articles of organization filed with the state, an EIN from the IRS, and a sales tax account with the state revenue department. Because it sells food, it will need a mobile food establishment permit from the county health department, which requires an inspection of the trailer and an agreement with a licensed commissary kitchen for cleaning and water. Each founder will complete food safety manager certification. The business will also obtain city vendor permits and fire inspections where required, and it will confirm each farmers market's own vendor rules before signing on.

Contracts

The business will rely on four kinds of contracts. Buying beans from the roaster and pastries from the bakery are sales of goods, so the Uniform Commercial Code's Article 2 governs them rather than common law; Melvin (2018) notes that Article 2 lets merchants form binding deals even when some terms are left open and that a sale of goods priced at $500 or more must be evidenced in writing. The founders will put both supply relationships in short written agreements stating prices, delivery schedules and how quality problems are handled. Agreements with office park managers will set the location, hours and any fee. Event contracts will be written, requiring a deposit and setting out the menu, number of guests, price and cancellation terms, so both parties know their obligations. Finally, the bank loan agreement will be reviewed carefully, especially any personal guarantee the bank requires, since a guarantee would expose the founders personally despite the LLC.

Intellectual Property

The name Grounded Mobile Coffee and its logo are the business's most valuable intangible assets. Before investing in signs and cups, the founders will search the federal trademark database and state records to make sure no similar mark is used for coffee in their market. The United States Patent and Trademark Office explains that trademark rights arise from use, but that federal registration provides nationwide notice and important legal advantages (United States Patent and Trademark Office, n.d.). Once the business is operating, the founders will apply for federal registration. Recipes and supplier pricing will be treated as confidential information, and employees will sign a short confidentiality agreement.

Employment

The business will hire two part-time baristas in its first year. A key legal question is whether they are employees or independent contractors. The IRS sorts the evidence into three groups, who directs the work, who controls the money side and how the parties describe and structure their relationship, and the more of that control the business holds, the more likely the worker is an employee (Internal Revenue Service, n.d.). Grounded's baristas will work assigned shifts, follow its recipes and use its trailer, so they will be classified as employees. The business will withhold and pay employment taxes, carry workers' compensation insurance as state law requires, pay at least the applicable minimum wage, track hours for overtime, and allow tips to belong to the employees who earn them. Melvin (2018) notes that misclassifying employees as contractors can result in back taxes and penalties, a risk the founders will avoid from the start. Hiring will follow written criteria and the same interview questions for each applicant.

Risk Management

A mobile food business faces risks of injury, illness and accident. The LLC will carry general liability insurance, product liability coverage for food served, commercial auto insurance for the truck that tows the trailer, and property coverage for the espresso equipment. Negligence claims, such as a customer burned by a spilled drink or sickened by improperly stored milk, are the most likely legal exposure, so the founders will follow written food safety procedures, keep temperature logs and train staff to serve hot drinks with secure lids. Many event venues and office parks also require proof of insurance before allowing a vendor on site, and some ask to be named as additional insureds. The founders will also review each event contract for indemnification clauses, which can shift liability for incidents at the event onto the vendor, and will negotiate those clauses or decline events where the risk is out of proportion to the fee.

Financial Overview

Startup costs include the trailer and espresso equipment at $62,000, a generator and water system at $8,000, permits, legal and registration fees at $3,500, initial inventory at $4,000 and a cash reserve of $7,500. With an average sale of $6.50 and a gross margin of about 70 percent after ingredients, the business needs about 160 sales per operating day, over 300 operating days, to cover its fixed costs, including loan payments, insurance and commissary fees, and pay the founders modest salaries in the first year.

Ethical Commitments

The founders intend for Grounded to reflect their faith in how it does business, not only in what it sells. Grudem (2003) argues that commercial transactions and profit can glorify God when they are honest and benefit both parties. Grounded will price fairly and display prices clearly, pay employees promptly and fairly, honor its contracts even when they become inconvenient, and treat competing vendors at markets with courtesy. The founders also plan to give a share of event profits to local ministries.

Conclusion

Grounded Mobile Coffee is a modest business, but even a single trailer operates within a demanding legal environment. By choosing an LLC, securing the right permits, putting its agreements in writing, protecting its brand, classifying and treating its workers properly and managing liability through insurance and safety procedures, the business can serve its community well and give its founders a sound foundation to grow.

References

Grudem, W. (2003). Business for the glory of God: The Bible's teaching on the moral goodness of business. Crossway.

Internal Revenue Service. (n.d.). Independent contractor (self-employed) or employee?

Melvin, S. P. (2018). The legal environment of business: A managerial approach: Theory to practice (3rd ed.). McGraw-Hill Education.

United States Patent and Trademark Office. (n.d.). Trademark basics.

U.S. Small Business Administration. (n.d.). Choose a business structure.