Court Title and Number

Your Name

Your Address

Student Number

Court Title and Number

Project Number

Memorandum

To: Supervisor

From: Your Name

Re: CIA

Date: October 1, 2012

Summary of Applicable Facts: Our client is the CEO of the Career Institute of America (CIA). It is an organization that trains students, mostly online, for careers in the auto industry. The CIA also has two small classrooms which have face-to-face classes. The instructors are purportedly independent contractors, but our client is concerned that the contracts they have signed may not be appropriate or legal. The instructors teach the classes and issue the grades to the students.

The CIA has been a non-profit corporation up to this point. However, our client is looking into changing into a “for profit” corporation. He would like to retain most of the ownership and control of the corporation. Most of the company’s income is derived from the online training.

Issues:

1)  What type of business organization is best for CIA?

2)  What should be included in a business agreement with the independent contractors/instructors at CIA?

Independent contractors are self-employed and are not covered by employment laws, labor laws and tax laws that employees are. The statutes do not always clearly define the term “employee” or make clear the difference between employee and independent contractor. But, different government entities have definitions which give a general description of how to tell the difference between independent contractors and employees. One way to tell is the degree of control the company has over the person. If there is enough control, then the person is an employee. For instance, if there are set hours, places of work, requirements about checking in and out, rules and regulations of the job—that person is probably an employee. The IRS also takes into account the degree to which the potential employee is economically dependent on the business. For instance if the person has only the one job to do, and does not have several different jobs to do, then the person is likely an employee. Most independent contractors have several jobs or projects to do, either at the same time, or consecutively.

The classrooms might be a problem, however, because the classes would be at set times and places and could not be done at the behest of the teacher/independent contractor. Those teachers might have to be made employees, or the client may have to do away with the in-classroom classes. Non-profit organizations include, but are not limited to:

1.  fraternal beneficiary societies,

2.  orders or associations, cemetery corporations and corporations organized or trusts created for religious, charitable, scientific or educational purposes or for the prevention of cruelty to children or animals, home owner associations,

3.  business leagues or organizations not organized for profit but operated exclusively for the promotion of social welfare, as well as clubs organized and operated exclusively for pleasure, recreation and other non-profit purposes.

The net profit of these organizations cannot benefit any private stockholder or member. Therefore, our client cannot expect to make profits when it is a non-profit organization. The type of business that would be best for our client is probably a corporation where he is the only stockholder, or holds most of the stock. That way he can adjust or sell stock when he wants to, or needs to. The profits would be his as the main or only stockholder, yet he would not be personally liable for debts and legal actions against the company. There are tax consequences, but also the ultimate protection and control if held by one stockholder.