Module 2 – Case
Business Organization and Business Torts
As with all of your Case Assignments, make sure to thoroughly review the Pearson tutorials and all of the required textbook chapters before you start on this paper. You need to cite at least three different sources from the background materials in your paper. Make sure you fully understand the main types of legal structures for a business, as well as the main principles of tort law.
Then, go through the scenarios below. For each scenario, answer the questions and make sure to support each answer with, at least, one reference to one of the readings in the background materials. Be clear about how your reading supports your answer. Your paper should be 4- to 5-pages total in length:
- You are the sole proprietor of a small business that is rapidly growing, but you need to raise additional money to fund your expansion. You talk to several friends and family members about making them partners in your business in exchange for investing in your business. However, they tell you that even though they have confidence in your business, they are too busy to be your business partners. They also don’t want to be liable for your debts if you go bankrupt or for any lawsuit that you face. What kind of legal structure do you think you should switch to in order to help persuade your friends and family members to invest in your business?
- The CEO of a major company gets into an argument with his neighbor for playing music too loud. The CEO gets very angry and ends up punching his neighbor. The neighbor considers a lawsuit, but finds out that the CEO’s company is a corporation and that corporations have limited liability. The neighbor also finds out that this corporation is close to bankruptcy, with zero net assets. Is there anything the neighbor can do? Or is the CEO of a corporation with zero net assets protected from a lawsuit for his act against his neighbor?
- You and your friend each own 10% of a corporation, but the main founder and CEO of the company owns 80% of the company. You and your friend are each serving on the board of directors of this corporation. But the CEO has appointed eight other board members, including his parents, his grandparents, his wife, and his brother-in-law. You and your friend think this is unfair because most of the board always takes the CEO’s side whenever you have a disagreement. Is the CEO within his rights to appoint a board that consists of his close family members that always outvotes you and your friend?
- You own a bicycle rental service and you provide a bicycle helmet to each renter. One of your renters returns with their bike after two hours and points out that the helmet that you gave him was defective and, if he had gotten in an accident, he would have been severely injured. This renter threatens to file a lawsuit. After some investigation, you find out that the helmet was a little bit older than some of the other helmets and, perhaps, should no longer be giving this one to customers. Did you commit an intentional tort, an unintentional tort, or neither? Are you liable for any money to this customer?
- You have are a co-owner of a limited liability company that manufacturers clothes. One of your main products are shirts that are labelled as being made of 100% polyester. However, you are now facing lawsuits because it is later found out that, due to some errors at the factory, the shirts are actually 5% cotton and 95% polyester, and some customers have had allergic reactions to cotton. Furthermore, if the lawsuit is successful, the company will likely go bankrupt with a $300,000 debt to the bank. Did the company commit an intentional tort, an unintentional tort, or neither? If the lawsuit is successful, will you be personally liable for either the claims of the people suing the company or the debts to the bank?
- Answer the assignment questions directly.
- Stay focused on the precise assignment questions. Don’t go off on tangents or devote a lot of space to summarizing general background materials.
- Make sure to use reliable and credible sources as your references. Articles published in established newspapers or business journals/magazines are preferred. If you find articles on the Internet, make sure they are from a credible source.
- Reference your sources of information with both a bibliography and in-text citations. See the Student Guide to Writing a High-Quality Academic Paper, including pages 13 and 14 on in-text citations. Another resource is the “Writing Style Guide,” which is found under “My Resources” in the TLC Portal.