Legal Memorandum: CIA Business Structure and Contractor Agreements

This assignment requires a legal memorandum analyzing the business structure and instructor contracts of Career Institute of America (CIA). The memorandum addresses two primary issues: the most appropriate form of business organization for CIA, considering Delaware law, and the requirements for an agent to be classified as an independent contractor rather than an employee. The student must research nonprofit and for-profit corporations, as well as limited liability companies, to recommend the best business structure for CIA. Additionally, the assignment requires an examination of employment and independent contractor agreements to determine the necessary elements for a valid independent contractor agreement. Finally, the assignment includes an analysis of ethical implications related to the client's desire to classify instructors as independent contractors, even if they legally qualify as employees, and the potential for bankruptcy to avoid tax liabilities.

This requires that you use the memo format provided and that you
research both issues requested:
 the most appropriate form of business organization to meet the
client’s needs
 and the requirements for an agent to be deemed an independent
contractor and not an employee.
 The memo below is from your supervisor. Read the memo and
respond according to the instructions provided.
 Research two areas of law and prepare a memorandum
addressing each area, so the client can be properly advised on
how to proceed.
o First, determine the limitations of a nonprofit corporation in
the state of Delaware, the state in which CIA was formed
and is doing business.
o You should also review the law for nonprofit and for-profit
corporations, as well as limited liability companies, to
determine the best form of business for the client.
o Consult the listing of Delaware statutes on the Delaware
state website at http://www.corp.delaware.gov/DElaw.shtml to
assist you in your research.
o For more general information concerning nonprofit
corporations, for profit corporations, and limited liability
companies, the following are additional websites that can
assist you:
http://www.law.cornell.edu
http://www.freeadvice.com
http://www.findlaw.com
http://www.nolo.com/legal-encyclopedia
http://www.hg.org
 Combine this information with what you know about business
organizations and what the client wants, so you can make a
recommendation for the best form of business organization for
CIA at this time.
 The second issue concerns the contract that CIA has its
instructors sign. (The instructors teach the programs and grade
the student’s papers.) You’ll need to review the law dealing with
employment and independent-contractor agreements to
determine what the contract needs to include to be properly

viewed as an independent contractor agreement and not an
employment agreement.
 Research employment and independent contractor agreements
online. A general search using these terms in the websites listed
above or Google, Yahoo!, or any other search engine should
assist you in finding the law dealing with these types of
agreements. Since the agreements will be signed by the client’s
instructors located in each state use the general law dealing with
such agreements.
 In your memorandum, please be sure to identify each of the key
elements necessary for the agreement to be viewed as an
independent-contractor agreement and not an employment
agreement, as well as any other suggestions you might have for
the client in connection with their instructor contracts.
 An ethical issue may also need to be addressed here. If you
determine that the instructors are really employees but he wants
you to prepare independent-contractor agreements, knowing he
will just file for bankruptcy later on if he is audited and owes back
taxes and penalties, what are the ethical implications for you and
for the CEO of CIA?
It’s suggested that you first locate the law for each of the two issues.
Then, you need to analyze the information you found and apply it to the
needs of the client. Both your research and your analysis should then
be summarized and included in your memo.
 Do not use too much legalese in the memo.
 You’re writing it to your supervisor, and you would expect him or
her to have some knowledge of the subject matter.
 You must completely explain what the law is for each type of
business organization you’re considering and the reasons you’ve
selected one type of business organization as best for your client.
 The same complete explanation is required when discussing the
issue of your client’s independent contractor agreement.
 Include a reference page that lists Web sites, journals, or any
other references used in preparing the submission. If you use
someone’s words or ideas, you must cite them directly in your
memo.
 Use the following format for your legal memorandum:
To:
From:

Re:
Date:
Summary of Applicable Facts:
Issues:
Law:
Analysis:
Criteria
 Provides a clear discussion of the assigned issue
 Supports his or her opinion by citing specific information from the
sources used
 Stays focused on the assigned issues
 Writes in his or her own words and uses quotation marks to
indicate direct quotations
 The student includes an introduction, analysis, and conclusion
supporting his or her positions
 Uses correct grammar, spelling, punctuation, and sentence
structure
 Uses correct memorandum format as described in the assignment
 Provides clear organization (for example, uses words like first,
however, on the other hand, and so on, consequently, since, next,
and when)
 Makes sure the paper contains no typographical errors
MEMORANDUM
To: Employee
From: Supervisor
Re: New Client, Career Institute of America, Inc. (CIA)
Date: December 6, 20—
FACTS:
We have just met a new client, the CEO of Career
Institute of America, Inc. (CIA). Although the business was formed a
year ago as a nonprofit corporation, they aren’t sure they are happy
being a nonprofit.
CIA is a classroom and online education organization that specializes in
training students in the United States auto industry, one of this country’s
largest industries. Their founder, who also serves as the CEO of CIA,
would like to retain most of the ownership and control of the company,
because it’s really his enterprise. He also has some concerns about the

independent contractor agreement their instructors must sign when they
agree to work for the company. He wants to be sure they aren’t
construed as employees of the company and are viewed as true
independent contractors. He had been told that it’s typical in the industry
that instructors such as his are viewed by the IRS as employees. He
has indicated that he doesn’t care what he has to do but he wants them
to be independent contractors, and if later on they are deemed to be
employees, he’ll just file for bankruptcy.
Note that most of the company’s income is from online training courses.
You should also know that they received a U.S. Department of Labor
retraining grant for the instruction they are currently providing and that
this type of grant is awarded only to nonprofit educational organizations.
Even though CIA was able to obtain this grant as a nonprofit institution,
they realize it was a one-time grant. They must make their income from
tuition for online courses and in the two small class-rooms in which they
teach traditional courses. This is why they aren’t necessarily opposed to
changing their form of business from a nonprofit organization to a for-
profit business.
You should further know that the employment contract they provide to
their instructors looks as if it was designed by an amateur and may not
comply with the legal requirements for a valid independent-contractor
agreement.