Assignment:
You work for Luree Intergalactic, Inc., a Montana Alpine ski manufacturer. Because of Latvia’s attractive relative labor costs, Luree joins forces with Aivars, AG, a Latvian firm, to build a new factory in Riga to serve the European market. Together, Luree and Aivars establish Udris, Ltd., a Latvian joint-stock company that will own the factory and sell products from it. Udris will be free to sells its skis to anyone, but expects to sell most of its initial output to Luree and Aivars. Under an agreement between Luree and Aivars, Luree will purchase skis from Udris for resale in Europe east of Ukraine, and in North and South America, New Zealand, and Japan; Aivars will market the remaining portion of Udris’s production to the rest of the world.
1. Because Luree has greater financial resources than does Aivars, its capital contribution will entitle it to 90 percent ownership of Udris. Aivars also recognizes that it has received the less attractive ski markets. It expects to derive most of its income from a special contract with Udris to test new ski models on mogul runs. Prepare a memorandum that anticipates what principal corporate law concerns will need to be addressed in this arrangement.
2. Aivars suggests that, as compensation for being Udris’s first customers, Luree and Aivars receive a discount off the price that Udris charges other purchasers. Analyze the transfer-pricing issues raised by this proposal.
Your answer must be typed, double-spaced, Times New Roman font (size 12), one-inch margins on all sides, APA format and also include references.