Error 000229 "Cannot open file..." when Adding a Field during Modelbuilder Run

[MPach]

I'm trying to Add a Field to shapefile that I create after running some processes during a modelbuilder run and I keep running into Error 000229: "Cannot Open File at.........location:". I've tried to put the file in the simplest path possible "C:\Folder1\<Filename>". I'm honestly not sure why I can't access the file at this location or any other location for that matter.

FYI, the field name is valid "Surface" and is a text field.

Any help is appreciated. 

[MPach]

It looks like this might have something to do with the inline workspace variable substitution that I'm using. I'm not sure why, but that appear to be a problem. 

[MPach · Accepted solution]

FYI, an inline variable works fine when referencing  a geodatabase, but not in when referencing a specific folder location where you are trying to create a shapefile.