Final Project Bus 206 Lydia Harris
Final Project Bus 206 Lydia Harris
Final Project Bus 206 Lydia Harris
Final Project
Lydia Harris
Module One:
A. Jurisdiction
In this case, Donald Margolin is filing a suit in New York against Novelty Now Inc., as well
as Chris, Matt and Ian, who are the owners of Funny Face. There are several different factors to
look at in order to determine which jurisdiction fits for this case. The first factor to consider is
personal jurisdiction, which refers to a court having the power to bring a defendant come before
the court and allows the court to reside over a case (Kubasek, 2017). The court gains personal
jurisdiction over the plaintiff once they file their suit with the court (Kubasek, 2017). The court
can then issue a complaint and summons with the defendant, which gives them personal
jurisdiction over the defendant, and lays out exactly what they are being charged with and
explains how they should respond to these documents (Kubasek, 2017). Generally, this
jurisdiction only covers as far as the states borders. However, if a party meets the minimum
amount of contact in the place where the incident occurs, then personal jurisdiction will be
extended to that location (Personal Jurisdiction, n.d.). Since Chris, Matt and Ian live in
California, Novelty Now Inc. is based in Florida, and the suit is being filed in New York, the
only possible way there could be personal jurisdiction in state court is if the courts in New York
used the long-arm statute. This statute “allows for a court to obtain personal jurisdiction over an
provided that the defendant has a sufficient connection with the state” (Long-arm statute, n.d.).
This way, no one can cause injury or do something illegal, and then evade all responsibilities by
As mentioned earlier, minimum contacts are another factor that must be looked into to
determine the jurisdiction of this case. Minimum contacts are “the level of a nonresident
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defendant's connection with or activity in a state that is sufficient under due process to support
the assertion of personal jurisdiction under a long-arm statute” (Merriam-Webster, n.d.). As long
as the plaintiff can provide enough evidence that the defendant had a compelling connection with
activities that occurred there, then personal jurisdiction can be applied through the long-arm
statute. The plaintiff would need to prove that Chris, Matt, Ian, Funny Face and Novelty Now
Inc. fulfill the minimum contacts in New York, and have a convincing connection through their
activities with their company in New York, in order to extend the personal jurisdiction. In this
situation, since Funny Face is marketed nationally through the radio, newspapers, the web and
Facebook, it could be argued in the courts that they did business in this state. This would then
meet the minimum contacts requirement and show that these men had sufficient connection with
the state of New York. If this could be proven in the court of law, then the New York state would
have personal jurisdiction over Novelty Now Inc., Funny Face, Chris, Matt, and Ian.
The last factor regarding jurisdiction that must be looked into is subject matter jurisdiction.
This is “the requirement that a given court [has the] power to hear the specific kind of claim that
is brought to that court” (Subject matter jurisdiction, n.d.). Additionally, this jurisdiction decides
which court will hear which case depending on the requirements they fulfill, whether it’s state
jurisdiction, federal jurisdiction, or concurrent jurisdiction (Kubasek, 2017). This case could be
tried in federal court because it is a suit that involves two people who live in different states.
However, in order to be brought to federal court “the amounts in controversy [must] exceed
$75,000” (Federal vs. State Courts, 2016). The case could also be brought to state court since this
subject matter is covered in their courts. State courts cover a very vast and diverse jurisdiction
that hears anything from family disputes to robberies (Federal vs. State Courts, 2016). More
important cases like bankruptcy or copyright, and where the United States is one of the parties
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involved in the case are usually brought to federal courts (Federal vs. State Courts, 2016). Since
this case is not as serious of a circumstance, and the state of New York can likely use the long
arm statute, the suit should stay on the state court level rather than bring it up to the federal
courts.
ADR, which stands for alternative dispute resolution, refers to “the resolution of legal
problems through other methods other than litigation” (Kubasek, 2017). Two different forms of
ADR that should be considered are arbitration and mediation. With arbitration, all parties are
able to select a neutral party to hear all of the facts in the case, and then make a decision based
off that (Kubasek, 2017). This is done outside a court of law, and is generally a lot faster and
cheaper than litigation (Kubasek, 2017). Moreover, parties have more control over the situation
rather than in litigation because they are able to choose the arbitrator who can be an expert on the
There are some disadvantages of using arbitration that are worthy of looking at, as well.
Firstly, trying to appeal an arbitration award is incredibly difficult, and they can sometimes end
in unfavorable decisions (Kubasek, 2017). Furthermore, some people believe they may be giving
up some of their rights (i.e. the right a speedy trial and due process) by giving up litigation, and
well, if companies or as party wants to keep their legal disputes from being public knowledge
(Kubasek, 2017).
Very similar to arbitration, both parties choose a neutral party in mediation, but the
neutral party is used “to help facilitate communication and suggest ways for the parties to solve
their dispute” (Kubasek, 2017). All parties involved try to work together to mutually agree on a
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solution to the dispute at hand, which offers more autonomy and control of the situation than
both litigation, and even arbitration in some ways (Kubasek, 2017). The mediator is generally an
expert in the area of the dispute between the parties, so they can offer some essential information
all parties involved since everyone communicates openly and honestly throughout the process
(Kubasek, 2017). When all parties recognize where the other is coming from is allows more
understanding between everyone, and can lead to more creative solutions that will please both
One of the main disadvantages of mediation is if a party goes into the process with zero
intention of actually making an agreement (Kubasek, 2017). That’s a waste of time and money
for both parties, and could potentially draw out the disagreement, and open up the possibility of
the other party eventually dropping the dispute. Another disadvantage is “if one party is more
knowledgeable of than the other, the agreement is not necessarily fair or equal” (Kubasek, 2017).
The party who does not understand much about the process could get the short end of the deal,
but think they made out well because of what they were told.
C. Preferred ADR
While both arbitration and mediation are great options for all parties in this suit to use, the
ADR method that Chris, Matt, Ian, Funny Face and Novelty Now Inc. would prefer to use is
mediation. First of all, it would be a quick, and less expensive option for them to take since they
are just starting out in their business. Secondly, mediation would be in every party’s best interest
to keep things out of the public eye. Keeping the dispute quiet for Chris, Matt, Ian and Funny
Face’s is important because, again, Funny Face is a new company. Mr. Margolin, additionally,
probably will not want everyone knowing about this mishap with a product since he may want to
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keep his powerful image. Furthermore, mediation allows an opportunity for both parties to find a
solution to the dispute that pleases everyone. Lastly, a decision that’s made in arbitration is very
hard to overturn, so it would be in their best interests to try to use mediation first.
The ADR method that Donald Margolin would prefer to use would be arbitration. Based off
the facts of the case, it does not seem like Mr. Margolin is willing to talk this over, and really
wants to be compensated for all the medical costs and all of the money he lost in business. Mr.
Margolin really depends on his business reputation for his living, so if that was tarnished and
cannot be regained among his peers, he may not be willing to attempt mediation. Arbitration will
also keep the costs lower than litigation, as well as speed up the process. He also has more
control over this situation than he would in litigation because he can help choose the neutral
party. The only problem Mr. Margolin may run into with arbitration is there is not much privacy,
D. Criminal Acts
According to the common law, “a corporation could not be considered a criminal because it
was actually not a person and thus did not have a ‘mind’” (Kubasek, 2017). In order to meet the
mens rea or “guilty mind” requirement, the defendant would have to be a person and not a
business (Kubasek, 2017). With that said, corporate officers, like Chris, Matt and Ian can still be
found personally liable if they are in some way benefiting from the crime committed by their
company (Kubasek, 2017). “Under the ‘responsible corporate officer’ doctrine, a court may
assess criminal liability even on a corporate executive or officer who did not engage in, direct, or
know about a specific criminal violation” (Kubasek, 2017). Even though Chris, Matt, Ian, Funny
Face, Novelty Now Inc. did not intentionally set out to turn their customers’ faces blue with their
product, it happened because they were trying to cut corners to lower their profit margins.
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Furthermore, although Chris was the sole person who made the decision to switch emulsifiers, it
could be argued they all failed to do their duty to prevent this from happening. Due to the
responsible corporate officer doctrine, the courts may find all parties involved guilty of
The main potential criminal act that could be found in this case is fraud. This is when a party
intentionally deceives others for their own personal or financial gain (Kubasek, 2017). There are
three elements that have to have occurred in order for fraud to take place: “1) a material false
representation made with intent to deceive (scieter), 2) a victim’s reasonable reliance on the false
representation, and 3) damages” (Kubasek, 2017). As long as it can be proven that all three of
these elements existed, then the law provides that fraud occurred in this situation.
With this case, PYR was used in the product when the FDA had not approved it and that
information was not made apparent to the customers who were using the product. Funny
Face and Novelty Now Inc. were lying to the public about what their product contained.
Next, these customers relied on the product working correctly as an aftershave lotion that
was marketed nation-wide. When Mr. Margolin was using the product he was using it under
the false representation the company was providing. Then, the product caused permanent
damage to Mr. Margolin’s face when the product turned his face a shade of blue. Mr.
Margolin depends on being a public speaker and depends on his business reputation as CEO,
which all took a negative impact when his face became discolored due to the aftershave
lotion.
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This case shows that Chris was the representative from Funny Face who was meeting
with Novelty Now Inc.. He also made the ultimate decision of cutting costs and using PYR
instead of an FDA approved emulsifier they were using previously in Novelty Now Inc.’s
formula. That decision alone can be seen as a criminal offense. Although Chris is the one
who was making these decisions, all the men can be found liable because they didn’t stop
these decisions from occurring, and did not use their power to prevent this situation.
Furthermore, Novelty Now Inc. can be found liable due to fact they were knowledgeable and
complicit in changing the emulsifier in the product to one that was not FDA approved. Like
stated previously, that action can be considered a criminal act, further proving the law will
most likely also hold Novelty Now Inc. liable in this suit. All of these facts lead towards the
court and the law finding Chris, Matt, Ian, and Novelty Now Inc. found guilty of fraud, and
G. Ethical Decision-Making
The process of essential ethical decision-making that businesses use is called the WPH
process. WPH has three elements: Who (stakeholders), Purpose (values), and How
(guidelines) (Kubasek, 2017). In this situation, the main stakeholders would be the
consumers. These are the people who are buying a product that is being misrepresented to the
public. The consumers can also be negatively impacted by permanent skin damage and
discoloration due to the product containing PYR. The values in this circumstance would be
efficiency because the whole reason Chris and Funny Face ultimately switched emulsifiers
was to cut costs and increase their profit margins. They tried to cut corners to minimize costs,
which only ended up damaging their reputation, and harming a consumer. Lastly, the
guideline in this case is the Golden Rule. Perhaps if someone was put in Funny Face’s shoes,
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he or she may do things differently than Chris, Matt, and Ian did, and not put money above
their consumer’s safety. Ultimately, no one knows exactly how he or she would act in that
situation. Nevertheless, the Golden Rule states ‘treat others the way you want to be treated’,
and Chris, Matt and Ian would most likely not want to be treated like they’ve treated their
consumers. If Chris, Matt, Ian and Novelty Now Inc. could go back, maybe their choices
would be different knowing the consequences and negative impacts it would cause.
Milestone Two:
A. Valid Contract
To understand whether or not Sam Stevens and the chain store had a valid contract, there are
four elements to review. The first element of a valid contract includes the offer to enter into a
contract by one party to another, which leads to the acceptance of said offer (Kubasek, 2017).
Sam was an inventor of a machine that played a sound of a barking dog that would be used as a
safety device to scare off any intruders. In this situation, Sam verbally told the manager of a
national chain store, which sold safety products, that he would ship them 1,000 units of his
invention. The chain store, additionally, told Sam they wanted to sell his invention exclusively.
In regard to the first element, it does appear to be fully satisfied by both parties. Although a
contract had not been signed, both the chain store and Sam had agreed to the 1,000 units, and
The second element of a valid contract is the consideration, which lays out exactly what
each party will be receiving in the contract (Kubasek, 2017). It’s difficult to know if the two
parties discussed what Sam would be receiving in exchange for the product. However, based on
the information provided, consideration for Sam does not appear to exist. There is no information
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about how Sam would get paid, what percentage of the money Sam would receive for the sold
product or if he would be getting any compensation for giving the store exclusive selling rights.
The consideration for the national chain store would have been 1,000 units of Sam’s device, as
well as the exclusive selling rights to this product. By the rule of law, the contract could be
deemed not valid based on this element not being completely fulfilled.
The third element of a valid contract is contractual capacity or “the legal ability to enter into
a binding agreement” (Kubasek, 2017). Generally, if the two parties are over the age of majority
(which is usually 18 years old), are not intoxicated, and do not have a mental illness, then they
would qualify to have contractual capacity (Kubasek, 2017). Based off the information provided,
it can only be assumed both parties in this contract are above the age of 18, and were in sound
mind when creating this agreement. The specifics of ages and mental health of either party has
not been stipulated. However, if it turned out that Sam was under the age of 18 when this
agreement was made, then the contract would not be valid, and Sam would not be held liable.
Additionally, the contract would not be valid if Sam suffered from a mental illness, or if he was
inebriated and was not in sound mind when he made the deal. Until these specifics are given, this
The fourth and last element of a valid contract is legal object, which states nothing illegal or
against public policy can exist in the contract in order to be able to implement it (Kubasek,
2017). In this scenario, nothing illegal took place in the oral agreement made between Sam and
the store manager. The two parties made a verbal agreement to send the chain store 1,000 units,
and give exclusive rights to their product. No part of this scenario is against the law or against
Altogether, all of the elements required for a valid contract are not satisfied. There is no
consideration explicitly stated for Sam in the information provided, as well as no information
about each party’s contractual capacity. Additionally, there was no specific timeline discussed or
a written contract explicitly lying out all the terms. Sam had, also, not heard from the store in
months regarding the agreement he had made with the store manager. According to rule of law,
this is not a valid contract between Sam and the chain store. The two parties have only made an
Assuming there is not a valid contract between both Sam and the chain store, quasi-contract
contractual obligation imposed by the court “in order to prevent one party from being unjustly
enriched at the expense of another” (Kubasek, 2017). This only occurs if there is not an actual or
valid contract between two parties in order to be fair and to not give one party any unjust
enrichment (Kubasek, 2017). In this scenario, it is not evident how Sam gets any advantage or
unjust enrichment by not sending the 1,000 units of his product immediately. It would greatly
benefit Sam to sell his product at a chain store. Furthermore, it could potentially tarnish his
business reputation if he did not follow through with an order if he was under contract. If
anything, this could cause more harm than good to Sam’s business, getting his product out on the
market, as well as his reputation. Moreover, it is not clear exactly how Sam not sending the
1,000 units of his product straight away harmed the chain store. Based on the information
provided, it does not appear there was any exchange of money so the store is not losing money
by not receiving the product. Either party does not seem to have an unfair advantage in this
situation, therefore is highly unlikely the chain store will prevail on the claim of quasi-contract.
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The last claim the chain store may be able to justify is promissory estoppel. Promissory
estoppel happens when three things occur: 1) one party promises something, and understands the
other party relies on said promise 2) the other party actually does rely on the promise that was
made 3) the promise is carried out in order to avoid unfairness (Kubasek, 2017). There is a slight
chance that the chain store may be able to claim promissory estoppel because a verbal agreement
was made between Sam and the store regarding the 1,000 units of his product. However, very
similar to the reasons why quasi-contract would not prevail, it does not appear that Sam not
sending the 1,000 units harmed the store in any way. There was no money exchanged yet, so the
store was not losing anything by not receiving the product. The store did send a letter demanding
the 1,000 units that were promised, but other than that, there is not much information about the
store heavily relying on this product. Additionally, it does not appear Sam understood the store
would be expecting the product immediately. They had not spoken to him in months, and a valid
contract had not been created regarding all the logistics and considerations. Based on all of this,
the chain store will most likely not prevail on the claim of promissory estoppel, either.
The leasing contract that the tenant, Sam, and his landlord, Quinn, had originally agreed upon
and signed states all of the rights and obligations of each party. Some of the obligations for
landlords include: duty to put tenant in possession, duty of covenant of quiet enjoyment, and
duty not to commit waste (Kubasek, 2017). The corresponding rights of tenants include: right to
retain possession, right to quiet enjoyment of the property, and the right to reimbursement for
tenant’s waste (Kubasek, 2017). One of the basic rights that Sam is breaking with the noise from
his dog invention is the tenant’s right to quiet enjoyment of the property. Sam is allowed to
peacefully enjoy his property, as long as he does not disturb any of the other occupants with
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unreasonable amounts of noise and disturbing the peace. The facts provided suggest the barking
product was disturbing other apartments surrounding him, which would be a violation of his
contract with the landlord. The breach of contract gives the tenant grounds for eviction.
The second reason Sam was evicted was because he was running a business in his
apartment. Some leasing contracts stipulate a commercial business may not be run out of a rental
residential property (Kubasek, 2017). If this law is violated, then that can result in eviction. The
zoning laws may also restrict how people must use the property including running a business out
of a residential property (Kubasek, 2017). Sam had a conversation with Quinn, his landlord,
about his barking device, which is most likely when he became aware of Sam’s business. Since
Sam appears to be creating a product in his home that he may start selling in stores, Quinn
considers this starting a business in his apartment, which would be in breach of his leasing
contract.
D. Grounds to Evict
Based on all of the information provided, Quinn has grounds to evict Sam from his apartment
due to Sam disturbing other tenants with his device. In the contract, Quinn promised to provide
Sam with covenant of quiet enjoyment, which Sam, in turn, has been given the right to quiet
enjoyment of the property. Since Sam is not obeying this part of the contract he signed, Quinn
has the legal grounds to evict Sam. Additionally, just as Quinn promised to provide Sam with the
covenant of quiet enjoyment, he promised his other tenants that same thing. Therefore, if a tenant
is being to loud and breaking the quiet enjoyment of others in the building, Quinn is responsible
Quinn may also have grounds to evict Sam if there was a part of the leasing contract that
stated Sam was not allowed to run a business out of his apartment. Where Quinn may run into
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difficulty, in regards to the law, is that he did not tell Sam to stop when Sam informed him of this
“business”. If Quinn knew Sam was breaching the contract they had signed, legally he should
have told him to stop upon hearing of the business. This could be seen as Quinn waiving the
clause, and approving of the business, especially since Quinn wished Sam luck on the invention
of the device.
E. Defenses
Sam has many defenses that he may raise to combat the eviction action on both grounds. Firstly,
regarding the noise the complaint, the information provided doesn’t show exactly how many
people or how often the other tenants were complaining about the barking. The severity of the
problem was not provided, so it is difficult to know how big of an issue it was for the other
tenants. Additionally, if Sam can prove in court that his invention was not absurdly loud and did
not break the peace for other tenants, then he may be able to bring a suit against the landlord or
even sue for damages. Furthermore, Sam was not warned about the noise problem before he
received his eviction notice. He was not given a chance to amend the noise problem or to even
realize that it was an issue that needed to be changed. Moreover, depending on the state that they
reside in, Sam could be allowed up to 90 days to move out of his apartment (Goldscholle, 2020).
Usually, “the time allowed under state law for such a notice is usually 30 or 60 days, but it may
be as short as 20 days or as long as 90 days” (Goldscholle, 2020). This all relies on the laws in
the states that Sam and Quinn reside in, however. This could potentially give Sam a little more
time to find another place to move out, or even determine with a lawyer if he has a chance at
In regards to Sam running a business out of his apartment, like stated earlier, Quinn
wished him luck on the invention of his device when Quinn was told about it. Quinn has no
grounds to evict Sam if he knew of his wrongdoing, and he did not tell Sam to stop running the
business in the apartment. Sam was informing his landlord of what was happening, and Quinn
wishing him luck with his device can be seen as Quinn waiving the clause in the lease
agreement. This interaction between the two can also appear to be a verbal agreement that
showed the landlord was okay with Sam’s business in the apartment, as well as Quinn
encouraging Sam to keep going. Lastly, Sam, again, was not warned about his actions prior to
the eviction notice, and thus not given a chance to correct his actions or to understand what he
was doing was not allowed in his apartment. As far as he knew, the landlord approved and
encouraged him in regards to his invention. Therefore, Sam has ample grounds to defend himself
Milestone Three:
A. Business Entities
There are four different business entities for Jeb and Josh to consider before selecting the
right one for them. The first business form is sole proprietorship, which is when one person
undertakes all the responsibilities of management and receives all the profits (Kubasek, 2017).
This is the first and main reason why this form would not work for Jeb and Josh. Jeb has said
that he will not participate in the day-to-day operations at the store or any of the excursions.
However, he will not have much say in the business if they choose sole proprietorship with Josh
as the sole proprietor, and vice versa if Jeb is the sole proprietor. Additionally, one partner has to
rely on the other to provide him his half of the profits, or perhaps more likely, they would have
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to draw up a contract stating each partner receives equal profits. This may be far too much
paperwork and trouble than this option may be worth. Furthermore, sole proprietorships are very
easy to start up, but the sole proprietor is held personally liable for the losses of the business and
can be sued personally for something related to their business (Kubasek, 2017). This would be a
huge downside to this option for Jeb and Josh. Additionally, the only funding that the owners get
are their own personal funds, as well as any loans that they can acquire (Kubasek, 2017). This is
another big downside to this entity. Altogether, a sole proprietorship does not seem to fit the
needs of Jeb and Josh, and would not work for multiple reasons.
between two or more people who co-own a business for profit” (Kubasek, 2017). Just like the
last form, the creation of partnerships is very easy to start up, and the partners can be held
personally liable for any losses of the business (Kubasek, 2017). This would be the main thing
that would most likely deter Jeb and Josh from choosing this option. Being liable for all the
business losses are not a great position to be in if something goes wrong. Plus, the main source of
money comes from Jed, so if anything were to happen that would bankrupt him, the business
would greatly suffer. On the positive side, any income that the business receives would be
considered personal income for the partners (Kubasek, 2017). Moreover, any of the losses from
the business may be taken from taxes (Kubasek, 2017). This form offers a lot of advantages that
would be good for Jeb and Josh, and a valid choice for them to consider choosing. However,
being personally held liable for any losses of the business may ultimately not be the best course
Other forms of partnerships include general partnerships, limited partnerships (LP), and
limited liability partnership (LLP). A general partnership is a partnership where the partners
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divide the profits and management responsibilities between them equally (Kubasek, 2017).
Additionally, the partners in this partnership are responsible for all the debts the business accrues
(Kubasek, 2017). The liability for the business losses is a big disadvantage for Jeb and Josh, plus
Jeb does not want to a part of the day-to-day operations of the business. A limited partnership
consists “of one general partner and at least one limited partner who does not have any part in the
management of the business” (Kubasek, 2017). While Jeb did not want to be part of the small
everyday decisions, he most likely will want to have a say in bigger management decisions. With
this partnership, he will not have much say over what occurs in the business, or where his money
will go. The general partners are also responsible for the business losses, while the limited
partners are only liable up to the amount they invested in the business (Kubasek, 2017). Josh will
not have the cash flow to help pay the debts if any problems were to arise, and Jeb may not either
if he goes bankrupt. Altogether, these do not seem like good options for Jeb and Josh to choose,
as it does not cover their personal liability and cash flow problems. Lastly, a limited liability
partnership (LLP) is “a partnership in which all partners are liable only to the extent of the
partnership’s assets” (Kubasek, 2017). This may be a good option for Jeb and Josh to consider
solely for that reason. They will only have to be responsible for paying up to the amount they
invested in the business if any liability issues were to come up (Kubasek, 2017). This will protect
all of their personal assets, like Jeb’s wind-farms. However, being liable for the amount of
money invested may be more of a problem for Jeb since he is investing more money into the
business than Josh. Furthermore, LLPs have a few special requirements in order to be created,
and the partners have to pay taxes on their shares of income they get from the business (Kubasek,
2017). Overall though, an LLP seems like a solid form for Jeb and Josh to consider choosing.
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The third business entity for Jeb and Josh to consider is a corporation in which “a legal entity
[is] formed by issuing stock to investors, who are the owners of the corporation” (Kubasek,
2017). The shareholders of the company cannot be sued because they have limited liability, and
all the profits they receive are taxed as their personal income (Kubasek, 2017), which are great
advantages for Jeb and Josh. Jeb could also be considered a shareholder since he does not want
to be a part of the day-to-day operations, but still wants to have a say where his money is going.
As shareholders, they cannot be sued for something related to the company, which would protect
the business assets of any shareholders or officers. This would be greatly beneficial for Jeb
regarding his wind-power business. Furthermore, in a company is it fairly easy to increase the
business’s capital by distributing stock (Kubasek, 2017). This is preferable because investors,
loans and personal funds are not the only option for funding. Whenever more money is needed,
However, there are a few disadvantages of corporations to consider. The first is that “a
corporation must pay taxes on its profits, and its shareholders must pay taxes on the dividends
they receive from it” (Kubasek, 2017). Jeb and Josh may also not have as much say in what goes
on in their company since there are multiple stakeholders to please, and officers making the final
decisions (Kubasek, 2017). Additionally, there are regulations companies have to keep up with in
order to institute and preserve the corporate form (Kubasek, 2017). This includes creating
bylaws, as well as documenting certain officer or board meetings and transactions (Kubasek,
2017). Depending on how many formalities, and guidelines Jeb and Josh prefer to follow, this
may be a good option for them to consider. The most important aspects are covered with this
form, which is money and limited liability for the shareholders, making this one of the better
The fourth and last business for the two to consider is a limited liability company or LLC.
The members of this unincorporated business have limited liability, similar to corporations, and
are taxed similar to partnerships (Kubasek, 2017). These are huge advantages since the members
cannot be sued or be held liable on behalf of the company’s actions, and they will only get taxed
once. While there are many positives, there are also a few negative aspects. The main downside
is the partners will be held personally responsible for any of the business losses, which, again,
may become a problem if Jeb goes bankrupt for whatever reason. Additionally, it is quite
difficult to form an LLC. Limited liability companies, also, do not cover the potential money
flow problem, but it does provide limited liability for Jeb and Josh, which is a huge positive. This
business form has many advantages for Jeb and Josh, and would be a valid entity to consider for
Arcadia Sports.
The business entity that Jeb and Josh should choose is a corporation. First of all, with a
corporation, if Jeb and Josh are shareholders, they will not be held personally liable for any debt,
and cannot be sued. This could potentially be a big problem since they are including outdoor
excursions in their business. The limited liability, plus any insurance the company purchases to
further cover other kinds of liability, and personal injury waiver forms, will cover Jeb and Josh
quite well. Their profits from the business will be taxed like income, as well. Furthermore, one of
the biggest advantages of a corporation is the fact they can issue more stock in order to gain
more capital for the business. Cash flow could potentially be an issue if they solely relied on
Jeb’s money, and if he had gone bankrupt. Even though they have to follow more regulations
that any other business entity, and pay taxes twice, the advantages of this form seem to outweigh
the disadvantages.
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C. Damages
The business entity that would find Jeb and Josh liable to Jane for damages regarding the raft
accident is a partnership. As stated earlier, when a partnership is formed “partners are personally
liable for all losses, including those of another partner (in most cases)” (Kubasek, 2017). The
liability also extends to any injuries or damages that may befall their customers in the business.
This is due to partnerships having unlimited liabilities (Kubasek, 2017). In a business where
people can potentially get hurt, it is important to have a business entity that protects the business
from being sued and held liable. Evidently, a partnership is not the right way for Jeb and Josh to
go, which is why choosing the correct business form that matches the business model is so
important. Additionally, the use of liability waiver forms and purchasing insurance to cover any
After analyzing all the business entities, it seems many of them would allow Jeb’s personal
creditors to seize the assets and/or profits of Arcadia Sports. However, there does seem to be one
business entity that would give Jeb’s personal creditors the ability to seize a great amount of the
assets and/or profits of Arcadia Sports and that is a general partnership. As identified earlier,
partners in a general partnership are responsible for all debts and losses that a business
accumulates (Kubasek, 2017). Furthermore, each partner in the partnership has unlimited
liabilities regarding each partner’s commitments in the business (Kubasek, 2017). This means all
of the partners can be equally held liable for any amount of injuries or damages. So Jeb’s
personal creditors would then be able to seize Arcadia Sports’ assets and/or profits, and Jane
could most likely receive compensation for her injuries. Altogether, this is why a general
partnership is not ideal for Jeb, Josh, and the future of Arcadia Sports.
21
Final Project
References:
Federal vs. State Courts - Key Differences. (2016, June 21). Retrieved from
https://litigation.findlaw.com/legal-system/federal-vs-state-courts-key-differences.html
https://www.lexico.com/en/definition/fraud
https://real-estate-law.freeadvice.com/real-estate-law/landlord_tenant/eviction-notice-
process.htm
webster.com/legal/minimumcontacts
https://www.law.cornell.edu/wex/personal_jurisdiction
https://www.law.cornell.edu/wex/subject_matter_jurisdiction