Manager of ACME Fireworks PDF

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this is about being a manager for a ACME firework company...

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Manager of ACME Fireworks Deandrew Gaskin BUS 311 Business Law I Professor Michael Burton April 7, 2019

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Introduction

As manager of Acme Fireworks, we are a fireworks retailer who sells fireworks, puts on ground display fireworks, and large aerial display fireworks. The company started in the owner’s garage two years ago and now has 15 employees that you manage. The company started as a sole proprietorship, and the owner has never changed the entity. The owner has informed me that the company has received inquiries from several large businesses wondering if the company could create several fireworks displays on a regular basis. The owner told the inquirers that the company could fill such display orders, and a price per display was agreed upon. It was discussed that most of the cost for a fireworks display is for skilled labor, insurance, and the actual service of setting off the fireworks. The owner is anticipating that new employees will need to be hired but is worried that if the large orders for fireworks displays do not continue, the company will not have the funds to pay the new employees. The owner is now considering changing the business entity, but he does not know what entity to form or how to form it.

In order for ACME fireworks as a business to grow and expand their contract with other new businesses requesting their fireworks, we have to look into certain areas of the company by changing the entity of sole proprietorship, liabilities and contracts which will allow us to increase our employees for the new business but by hiring new employees and expanding the size of our business can also lead to higher risks so having protection from personal lawsuits would be in the best interest for the owner and the business.

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Determine if the contracts with the businesses will be governed by common law or the Uniform Commercial Code (UCC) and explain why. The contracts that are only negotiated based on ongoing performances depending on the work load and size of the display for this business would apply under Common Law because we are offering a service which takes actual labor. “The common law system emphasizes the making of rules through court decisions and traces its roots to England” (Rogers, 2012). UCC or Uniform Commercial Code Law was evolved from Common Law but only is involved when goods are being sold from state to state or business to business. “There are, however, some areas in the law that are of particular importance to business and in which even small variations in the law from one state to another can have a very negative effect. That’s why UCC was created to unify state laws affecting commerce into a single code that all states could adopt to make interstate commerce easier and more efficient. As a result of this concerted effort by some of this country’s leading legal experts, the UCC was enacted in whole or in part with only small changes by the legislatures of all states” (Rogers, 2012). “The UCC is a summary of traditional common law rules governing commercial transactions, which has been all or partially enacted into statutory law by the state legislatures. UCC rules are in many places identical to those from the common law” (Rogers, 2012). Before a display is set up with fireworks, it is placed under UCC because it is not under any service or operation which involves labor at the time but is moveable to a different location or the customer’s address when order is placed but when it is time to actually set one up then this is when common law takes over because now, services and labor are now required.

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Analyze whether the owner formed a contract with the businesses and apply the five essential elements of an enforceable contract. “A contract is a legally enforceable agreement. As this definition implies, a contract comes into existence from the voluntary assent of two or more individuals to enter into a legally binding agreement. Mutual accord is crucial to the formation of a contract. In order for there to be a valid contract, five basic elements must be present” (Rogers, 2012). The five essential elements to an enforceable contract are offer, acceptance, consideration, legality and capacity. The agreement that was made between the businesses and ACME fireworks were lawful because there was an offer and acceptance. Everything was legal due to the fact that services were offered, and compensation was agreed. Consideration was also provided because ACME fireworks covers their consideration by obtaining insurance to prevent any lawsuit or damages that where to happen to customers or employees. Both the businesses and ACME fireworks have the capacity to be in the contract because ACME can provide the services while the businesses pay for it. The consent was made freely because the other company wasn’t forced to do the contract and had to stay in it for a amount of time as to where a family’s house would one day randomly burn down due to a someone’s accidental fault of leaving the stove on when they went out to run errands.

Explain the potential personal liability to Acme Fireworks if a spectator is injured by a stray firework from a fireworks display. Performing firework displays will cause a level of personal liability to ACME fireworks since a nearby spectator could get injured from a stray firework. The employee that set off the fireworks would be considered the associate or agent of ACME who is the principle during these scenarios. Because of the relation between the agent and the principle, the expectations, required tasks and duties, loyalty, obedience, performance and accountability are what is expected of the agent from the principle. ACME being the

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principle knows that they owe an agreement of cooperation, compensation, indemnification and reimbursement to their employees (Rogers, 2012). ACME must ensure that the agents are skilled and trained to make sure they are able to take on and perform such tasks assigned for each given show. For doing so, ACME is supposed to compensate them for their performance and work as well as compensating them for any losses suffered under their agency agreement. The agents will not be held responsible nor liable if a bystander is injured from a stray firework if they are following orders the correct way given and in guidelines given by ACME. This is why companies need insurance as part of contract negotiations between the agent and the owner.

Discuss the different employment types and relationships relevant to agency law, and analyze the advantages and disadvantages of each type specific to Acme Fireworks. The fifteen employees that are employed by ACME will most likely not be enough to complete the needed labor when these events happen and because of that, ACME has the right to hire any workers of independent contractors or employees to meet the demands for each show that is needed. No matter how ACME choses to fulfill these requests, they would be held liable for everyone that involved into each work relationship. The principle here usually wouldn’t be held accountable for the acts of independent contractors where as it would be for employees. “There are additional incentives for using independent contractors. For example, a business must withhold amounts for garnishments or child support from its employees’ earnings. That is not the case with independent contractors. In addition, a business is not responsible for Social Security and Medicare for independent contractors, and it does not have to provide them with fringe benefits (pension and health benefits, etc.). And because independent contractors are not “employees,” they cannot bring claims—which can be very expensive to defend—against a business under statutes designed to protect employees from various forms of alleged

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discrimination. Further, in the event of patient injury or death, liability may be avoided if the injury or death is caused by the actions of the independent contractor, and not an employee of the business” (Buzogany, 2010). Although the advantages of using independent contractors seemed to be great due to not having to pay them for any liabilities or injuries, there are some disadvantages that still come with them when retaining one. “These disadvantages include the inability of the client to control how the contractor performs the service. The client cannot terminate without cause because the relationship between the client and the contractor is contractual as opposed to at will. Therefore, if the client terminates the relationship, they may be held liable for breach of contract. To avoid breach of contract, the client will need to be responsible for overseeing the legality of the working relationship” (McCabe, 2006).

Explain why Acme Fireworks should not operate as a sole proprietorship. Recommend a new business entity and provide rationale to support your recommendation. Due to the that the company will be taking on more business and bigger contracts from other businesses, we should no longer operate as a sole proprietorship and move the new business entity to as Limited Liability Company or (LLC) for a number of reasons. “Creditors of a member have little ability to get at the LLC's business. Typically, a creditor of a member only has the right to a "charging order." Under a charging order, the LLC can be required to pay to the creditor any distributions otherwise payable to the member. But the creditor normally has no power to force the LLC to make distributions. Creditors of partners commonly also have this remedy, but in some states a partner's creditors are not limited to the charging order remedy, while LLC members' creditors typically are. Increasingly, though, the charging order rules for partnerships and LLCs are the same. A few cases have allowed "reverse pierces," where creditors

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of a member are allowed to get at the LLC's assets. Typically, the member owns all or almost all of the interests in the LLC and has engaged in dubious conduct” (Schwidetzky, 2018). “The use of a LLC offers advantages over the usual practice of forming multiple legal entities to segregate assets and liabilities. The costs to organize and maintain a LLC are often less than comparable costs for multiple entities, and a LLC might require fewer organizational documents than multiple entities. Thus, an LLC might find it easier and quicker to add a new series than to organize an entirely new entity and generally provides a good external shield between creditors and the LLCs members” (Nevius, 2010).

Conclusion As manager of ACME fireworks, if we take this business entity and change it over from a sole proprietorship to an LLC or Liability Limited Company, we will be able to fulfill our contracts to our partners and businesses while helping us grow as a company. Also, more people will be employed and protected with this liability which makes it safer for others to corporate and work with us. I believe this change will be the one of the best decisions that this company has ever made because in doing so, it will be causing more revenue for the company itself. Eventually, we will be able to be all over the world and have thousands of businesses and people wanting us to set up their displays for parties, gatherings or fourth of July soon making us the number one brand of fireworks in the US and all over. The only bad thing about expanding the company with triple the number of employees would be in higher risks of injuries or innocent bystanders when using the fireworks which is also why a Liability Limited Company would help to prevent lawsuits and insure to help pay for whatever damages were cause. On my behalf, I can happily say that the owner was pleased and satisfied with the decision which will help to keep

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his company growing for many years. Also, this is all legal according to the UCC which allows this company to sell goods and transport to every state and country much more faster and efficient while being protected.

References

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Rogers, S. (2012). Essentials of Business Law [Electronic version]. Retrieved from https://content.ashford.edu/ Nevius, Alistair M. Journal of Accountancy. Jan2010, Vol. 209 Issue 1, p64-64. 1p. William A. Buzogany (2010), The Journal of Medical Practice Management: MPM [J Med Pract Manage] 2010 May-Jun; Vol. 25 (6), pp. 332-4. Schwidetzky, (2018) Journal of Accountancy. Dec2018, Vol. 226 Issue 6, p1-7. 7p (McCabe, 2006) San Diego Business Journal. 5/15/2006, Vol. 27 Issue 20, p14-14. 1/2p....