Interact Systems, Inc., has developed software tools that help hotel chains solve application integration problems. Interact's application integration server (AIS) provides a two-way interface between a central reservations system (CRS) and a property management system (PMS). At least two important trends in the hotel industry are relevant. First, hotels are shifting away from the manual booking of room reservations, and electronic bookings will continue to increase as more bookings are made over the Internet. Second, competitive pressures are forcing hotels to implement yield management programs and to increase customer service. By integrating the CRS and PMS through Interact's AIS, inventories can be better managed, yields improved, and customer service enhanced.

All reservation traffic is routed from the CRS to individual hotel properties. This allows Interact Systems to create a database that can be used to track customers and to facilitate marketing programs, such as frequent-stay or VIP programs, as a way of increasing customer satisfaction. Interact forecasts application integration expenditures in the hospitality industry to exceed $1 billion by 2012.

Greg Thomas founded Interact Systems in 2006 and developed the firm's middleware software and hospitality applications. He has twelve years of systems applications experience and currently is Interact's chief technology officer. Eric Westskow joined Interact in early 2009 as president and CEO. He previously had worked in sales and marketing in the software industry for more than twenty years.

A. What are the advantages of having formed the company as a corporation? 

B. What other organizational structures would have been appropriate? 

C. Could Interact Systems qualify for S corporation status with the IRS? Why or why not? 

D. What is the intellectual property involved in Interact Systems' business model? 

E. What methods of protection are available for Interact Systems' intellectual property?

F. What considerations are important in deciding whether to use an employment contract for the newly hired CEO?