Bob operated a flower shop as a sole proprietorship and decided to formalize the operation of the flower shop, so he formed a limited liability company (LLC) to own and operate the flower shop. After the LLC was formed, the LLC hired David to drive the delivery van that was owned by the LLC and that was used to deliver flowers to customers of the LLC. One day when David was delivering flowers for the flower shop using the van, he ran a red light and collided with a car driven by Jan, causing injuries to Jan and damages to her car. Who can Jan sue for the injuries that she received in that accident? Are there theories of recovery that Jan can assert that might make Bob liable? What facts would be necessary for Bob to be liable to Jan?Response must be in your own words and no references as per the professor. The response does not have to be long. Please do not extend two paragraphTextbook:Kubasek, N., Browne, M. N., Herron, D. J., Dhooge, L. J., & Barkacs, L. (2016). Dynamic business law: The essentials (3rd ed.). New York, NY: McGraw-Hill Education.____________________________________________________________________________________________Please respond to my classmate response below:Even though David was reckless while delivering the flowers and end up causing an accident as a result of running a red light. He was still carrying out his job duty in other words he is doing the job of the company. So therefore, because Bob flower shop is was limited liability company Jan can only sue the business for the injuries she sustains from the accident. In fact, Jan can sue, and enforce a judgment against, the business entity itself. However, she cannot sue the owners, officers, or managers of the corporation or LLC as individuals, unless she has a personal claim against owners that is separate from their role in the corporation or LLC. That’s because in most situations, the real people who own or operate the corporation or LLC aren’t themselves legally liable to pay the corporation’s or LLC’s debts unless there was fraud or a personal guaranty.
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UNIT VIII STUDY GUIDE
Course Learning Outcomes for Unit VIII
Upon completion of this unit, students should be able to:
5. Define the limitations of all forms of business ownership.
5.1 Identify the major forms of business organization.
5.2 Identify the advantages of each form of business organization.
Chapter 21: Forms of Business Organization, pp. 439–457
Some of the students taking this course are reading this lesson on a laptop or desktop computer
manufactured by Apple Inc. Some of you own a handheld device, portable music device, or phone produced
by Apple. Apple has made a fortune for investors because of their unique and innovative research and
development, their marketing approach, and their ability to create an interest in new and unthought-of
products that appear to be impossible.
On June 29, 2007, Apple released the first generation iPhone. The potential of the iPhone only existed in the
minds of the creative research and development personnel at Apple. The unsuspecting consumer was not
even aware he or she “needed” the features on that early iPhone nor the wealth of features on Apple’s most
recent iPhone models.
We, as consumers, enjoy the technology products organizations like Apple produce. We spend little time
thinking about Apple as a corporation with headquarters in Cupertino, California. The entity of Apple is a
corporation. It is a creation of mankind, yet is a new entity that can own property, enter into contracts to buy or
sell goods/services, hire/release employees, open bank accounts, borrow money, suebe sued in court, and is
even protected by our United States Constitution.
Business entities and new business endeavors are as old as mankind itself. “The ability to trade is a precursor
of the accumulation of wealth and procurement of scarce resources” (Goldman, Nienaber, & Pretorius,
2015, p. 2).
This unit explores the choice of legal entity. When someone decides to go into business for himself or herself,
the business often starts as a sole proprietorship. This is defined as a business in which one person (the sole
proprietor) is in control of the management and profits. This entity is easily created. There are no forms to file
nor banking requirements to meet. The sole proprietor has unfettered freedom in making ownership decisions
and keeps all of the profits. This is why it is the most common form of a business entity in the United States.
The biggest drawback to a sole proprietorship is the lack of personal liability protection. A sole proprietorship
is not considered a legal entity, which means it is not separate from the person who owns it. If the business is
sued for whatever reason, the sole proprietor is personally responsible for any obligations of the company.
Furthermore, there is no succession in a sole proprietorship. When the owner dies, the business is
A partnership is a voluntary association between two or more people who co-own a business for profit.
Forming a partnership is also easy, often formed without a written agreement. Similar to sole proprietorships,
most partnerships are not considered to be separate legal entities, and the income from the business is taxed
BBA 3210, Business Law
as individual income for each partner. Therefore, the same personal liability exposure
UNIT x STUDY
liability exposure is even greater. Consider the example in the textbook on page
441 in which Partner A
embezzles $50,000 from the partnership, and financial obligations cannot be met. Partner B is equally liable
for the $50,000 that was taken from the partnership.
Thus, it is strongly advised that partnerships form by written agreement. In this agreement, the name of the
partnership is identified, a fixed termination date can be set, the division of profits and losses can be laid out,
management duties can be divided, and, finally, the specific capital contributions that will be made by each
partner can be identified.
There are several varieties of partnerships: general partnership, limited partnership, and limited liability
partnership (LLP). A general partnership has equal division of profits, losses, and management responsibility
among the partners and unlimited personal liability for the partnership’s debts. A limited partnership has at
least one limited partner and at least two general partners. The limited partner’s liability extends no further
than the partner’s original investment in the partnership; the general partners assume all liability for the
The LLP is a fairly new form of partnership. This form was created by law so that all partners assume only
their fellow partner’s professional malpractice to the extent of the partnership’s assets. Thus, an LLP is legally
distinct from a limited partnership. It is a common choice for professionals who do business together because
it affords extra protection to the partners.
Corporations are separate legal entities formed by the issuance of stock to investors, who are the owners of
the corporation. The shareholders elect a board of directors who become responsible for the managing of the
business affairs. The board of directors then hires officers to run the business. A corporation is a separate
legal entity, meaning the corporation itself can be sued. The significance to shareholders is important
because shareholders are not personally liable for the debts of the corporation. The shareholders have some
exposure; however, it is limited to their investment in the corporation.
Unlike sole proprietorships or partnerships, a corporation survives the death of its shareholders. Corporations
must pay taxes on profits because they are separate legal entities. Shareholders also pay taxes on the
dividends they receive from the corporation. To avoid this double taxation, certain federal guidelines must be
observed. A corporation that enjoys the tax status of a partnership is known as an S Corporation.
The limited liability company (LLC) is an unincorporated business that is taxed in the same way as a
partnership (i.e., the members pay personal income taxes, and it has the limited liability of a corporation).
Many people would consider this as the best of both worlds, which is why the LLC is now the most commonlyformed legal entity in the United States.
All 50 states recognize an LLC as a business form; however, there are differences in the laws associated with
an LLC. For example, Delaware and Nevada have LLC laws that are very favorable to business. As a result,
businesses are enticed to form their LLCs under the laws of those states rather than of other states. LLC
owners are referred to as members, and unlike corporations, the allocation of profits and losses does not
have to be in proportion to ownership interests. For example, Angelo and Arthur form an LLC together.
Angelo has agreed to bankroll the operation, but Arthur has the million-dollar ideas. In their LLC operating
agreement (i.e., the document that outlines all of the terms of their LLC), Angelo is responsible for 100% of
losses and Arthur, 0%, despite their agreement to share profits 50-50.
The Internal Revenue Service (IRS) treats LLCs as partnerships or sole proprietorships and requires that
each member of the LLC report his or her share of profits and losses on personal tax returns. Unlike
corporations, the LLC is not required to have annual meetings, a board of directors, or officers. LLCs can be
managed by their members or can elect to be managed by non-members, similar to the corporation’s board of
directors. Most LLCs, at least at their onset, elect to be managed by their own members.
Goldman, G. A., Nienaber, H., & Pretorius, M. (2015). The essence of the contemporary business
organization: A critical reflection. Journal of Global Business and Technology, 11(2), 1-13.
BBA 3210, Business Law
UNIT x STUDY GUIDE
Learning Activities (Nongraded)
Construct a PowerPoint presentation entitled “Business Organizations.” The presentation should include
Slide 1: Title slide (name of the presentation, your name, university’s name)
Slide 2: Purpose the presentation
Slide 3-6: Identify and briefly explain the types of business organizations, and provide an example for
each. Include advantages and potential disadvantages.
Slide 7: References (Use APA format to identify the sources used for the presentation.)
Be sure to use the note section for each slide to include the actual script you would use while the slide is
showing; be clear and concise.
Nongraded Learning Activities are provided to aid students in their course of study. You do not have to submit
them. If you have questions, contact your instructor for further guidance and information.
BBA 3210, Business Law
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