BUS311 WEEK 5 FINAL PAPER
BUS311 WEEK 5 FINAL PAPER PRG211
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Date Created: 11/09/15
Running head: Final Paper 1 Final Paper Ashford University Business Law BUS 311 Introduction As the manager of Acme Fireworks, we are a fireworks retailer that sells fireworks, that 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 are managed. The company started as a sole proprietorship, and the owner has never changed the entity. The owner has informed you 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. No other details were discussed. The owner is Final Paper 2 anticipating that new employees will need to be hired, but he 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. Thesis In order for Acme Firework to formulate a comprehensive business plan that will increase and expand Acme Fireworks contracts with new business from companies that are requesting our fireworks, in order for us to move forward we need look into a few different areas of the business, changing the entity of sole proprietorship, liabilities, contracts and increasing our employees for the new business. But beware in that hiring new employees and expanding the size of the company could create higher risks, and having protection from personal lawsuits is in the owners’ best interest. With regards to the first issue taking on more business, which in return means more sales for the fireworks company, we should think about moving the company from a sole proprietorship to a Limited Liability Company (LLC). I believe as the manager we should no longer operate as a sole proprietorship. I recommend new business entity for Acme Fireworks, the LLC, “represents an attempt to combine the best features of a partnership with the best features of a corporation.” (Rogers, 2012) For a number of reasons the fact are that an Limited Liability Company guards the owner from the debts of and any lawsuits against the business, to me I believe that it's the preferred form of business organization for our company’s growth. When we start the Limited Liability Company, you as the business owner will be safeguarded Final Paper 3 from any and all liabilities or judgments against your fireworks business without having to incorporate. Additionally, as the Limited Liability Company form developed and became more widely accepted by individual states, the considerable tax benefits of the Limited Liability Company form became even stronger. For individual business owners, the Limited Liability Company offers the owner of a Limited Liability Company form, which is taxed as a sole proprietorship for the business owner. In addition to offering the owner important limited personal liability exposure, the Limited Liability Company retains important tax benefits of the sole proprietorship, such as: owner compensation in the form of distributions of profit, which are taxed at the individual owner's potentially lower marginal tax and passthrough of business losses, offsetting the owner's other nonbusiness income. When it comes to owing a fireworks company there are various liabilities, that they have manufacture, sell and when their customers are using their fireworks. This type of company needs to ensure that they we are well protected from the possibility of person liabilities for injuries cause from mishandling of fireworks. But if all parties that are involved with the fireworks take the right precautions and ensure that we have warning labels and how to use them correctly can strongly reduce of the risk of causing serious risk to our customers. During this move we would have an increase of employees on temporary contractors in order to help us manufacture more of our fireworks for the bigger request that we have coming in. Next during this new business transfer of operations we will need to look at contracts, this step will be to me the most important step the changes we will take on as a company. If the contracts with the new businesses will be governed by common law or the Uniform Commercial Code (UCC), we need Final Paper 4 to analyze whether the owner can formed a contract with the businesses, and apply the five essential elements of an enforceable contract. We also need to look into potential personal liability to Acme Fireworks if a spectator is injured by a stray firework from a fireworks display. Acme Fireworks needs to also take a look at the different employment types and relationships relevant to agency law, and try to analyze the advantages and disadvantages of each type specific to Acme Fireworks. Governed by Common law or Uniform Commercial Code (UCC) Common Law primarily does business with insurance, real estate, assets and employment contracts. While, UCC is primarily involved with sale of goods, Common law, “Common law system emphasizes the making of rules through court decisions.” (Rogers, 2012) Under the Uniform Commercial Code, “must be liberally construed and applied to promote its underlying purposes and policies, which are: (1) to simplify, clarify, and modernize the law governing commercial transactions; (2) to permit the continued expansion of commercial practices through custom, usage, and agreement of the parties; and (3) to make uniform the law among the various jurisdictions. Unless displaced by the particular provisions of the Uniform Commercial Code, the principles of law and equity, including the law merchant and the law relative to capacity to contract, principal and agent, estoppel, fraud, misrepresentation, duress, coercion, mistake, bankruptcy, and other validating or invalidating cause supplement its provisions.” (Cornell Law, 2015) I believe as the manager for Acme Fireworks that it would be a smart business decision for the company to move towards its contracts with other businesses with the Uniform Commercial code. Elements of an Enforceable Contract Final Paper 5 With the elements of an enforceable contract Acme fireworks need to be aware that there are five essential elements, Offer, Acceptance, Consideration, Legality and Capacity. 1. Offer: “An offer must contain an unequivocal (clear, unambiguous) promise to enter into a contract, must have reasonably certain terms, and must be communicated by the promisor (the person making the promise) to the promise” (Rogers, 2012) The large business requesting large orders of fireworks, and our business being able to provide the customer the large order of fireworks. 2. Acceptance: “Must be clear from the offeree’s words or actions that he intends to accept the offeror’s offer under the offeror’s terms” (Rogers, 2012). When you as the owner tell the large businesses requesting our fireworks, that our company can fill the large orders, there is an acceptance of the offer. 3. Consideration: “A contract is a bargainedfor exchange between the parties, and consideration is whatever is being exchanged. To put it yet another way, consideration is simply the price of the contract” (Rogers, 2012). There was a price agreed upon between the large businesses and you the owner. 4. Legality: The extent to which the contract is legal, abiding laws and statutes while not containing illegal expectations. It is generally presumed that in a commercial transaction, the contracting parties must have the intention to create a legally binding contract. Meaning that if you the owner sign the contract for the large orders for the fireworks, then our company will be able to sue the large buinesses if they do not fulfil their contractual provisions of the contract 5. Capacity: “There are two separate issues that may arise with regard to contractual capacity: age and mental competency” (Rogers, 2012). What this mean to us is that a persons under the age of 18 and mentally disordered does not have the capacity to enter into contracts any contract with us. Any contracts that our company creates by person or persons who are lacking in legal capacity are voidable. Any agreement we do with these new businesses we must have these five essential elements to be regarded as a contract. If any one of them is missing, the agreement will not be legally binding, which we want to ensure that we have to protect our company from a lawsuit. Fireworks injury Final Paper 6 We need to be careful with the potential personal liability to Acme Fireworks if a spectator is injured by a stray firework from a fireworks display that we sold to someone. Any manufactured flaw in our fireworks would mean the company is liable and we can be sued for negligence. “The law states that everyone has the duty to act with reasonable care to avoid creating undue risk of harm to others.” (Rogers, 2012) To me this means that our fireworks company needs to ensure that we are careful creating are fireworks safely, but that our customers need to be responsible when using our Acme Fireworks as well. Another good reason for our company moving towards a Limited Liability Company is that it would allow you to operate your company Acme Fireworks with the liability protection from any personal liabilities. I believe as long as we follow every precaution, regulation and use warning labels on all of our Acme Fireworks we should not have any liability cases against us. We can be held accountable if spectators are injured at a fireworks show, the court will be able to hold the company setting off the fireworks liable through negligence, as well as Acme Fireworks. When fireworks malfunction and cause injury, victims may be able to recover damages from the manufacturer, the importer of foreignmade fireworks, or the local retail seller. Because all of these entities have a duty to sell products that function properly, we may be liable for any injuries caused by a defective firework. Here is an example of a lawsuit against a fireworks company, “In Virginia, Kathryn Hollis was awarded a $4.75 million jury verdict against fireworks company Schaefer Pyrotechnics. Hollis and her two sons were injured after a box of linked fireworks fell over, sending explosive mortar into the crowd watching the town of Final Paper 7 Vienna’s Independence Day celebration. Hollis sustained a fractured arm, shrapnel embedded in her arm and shoulder, perforated eardrums, burns, and brain damage.” (Medina, 2012) One way for Acme Fireworks to ensure that we are not vulnerable, to any type of lawsuit is to have more security. Meaning we need to have some form of insurance, and inform the large businesses as well, that they might want protections from lawsuits as well. Firework insurance would protect the storage, transportation, and firing of our fireworks at the large businesses shows. Demands for injuries, or in some cases even death, could cause Acme Fireworks to go bankrupt, so we at Acme Fireworks having insurance and letting others know to obtain insurance would be my recommendations and a smart business decision for Acme Fireworks. The U.S. Consumer Product Safety Commission (CPSC) has many regulations regarding the firework business and safety regulations for fireworks devices. All of these regulations are important in any firework manufacturing business, but for a small business like Acme fireworks, we know that we have to grow into a considerably into a bigger company, the regulations are not only for a big fireworks manufacturing company but as well as for a smaller manufacturing company. In order to start manufacturing the large request for our clients, the facility must be considered before we change business entity and taking on larger orders. If taking on large orders means more employees are needed as discussed, Acme Fireworks will also need to look into the size a new building and ensure that new building will meet all the safety regulations as well the size of the building will be able to hold the orders from our customers. The U.S. Consumer Product Safety Commission (CPSC) has many regulations regarding the firework business and safety regulations for fireworks devices. “U.S. Consumer Product Final Paper 8 Safety Commission (CPSC) has issued mandatory safety regulations for fireworks devices. The CPSC enforces its fireworks regulations under the Federal Hazardous Substances Act (FHSA), 15 U.S.C. §1261. It is a violation of Federal law to import, distribute or sell fireworks that violate CPSC regulations. This summary has been developed to familiarize interested parties with the CPSC's fireworks regulations. It does not replace the Commission Statutes or Commission Interpretive Regulations set out in Title 16, Code of Federal Regulations (C.F.R.) Parts 1500 and 1507. (CPSC, 2015) All of these regulations are important in any firework manufacturing business, but for a smaller manufacturing company to grow into a much larger business or like us wanting to go into a LLC, we must look at moving into a new facility, the garage is no longer acceptable per the standards on the U.S. Consumer Product Safety Commission website. A facility must be considered before changing our business entity and taking on larger orders from our clients. If taking on large orders means more employees are needed, then we will also need to look into the size of the building and if all safety regulations are met for adding more people and if the size of the building will hold the orders. The U.S. Consumer Product Safety Commission also regulates fireworks in order to help prevent injuries and death to consumers, they have requirements for the fireworks and labeling of the fireworks that need to be met, if they are not met by a fireworks company, then they are not allowed to sell them to the consumer. I recommend you review their website to understand all the regulations, laws, and standards they have on fireworks. Twelve requirements that the U.S. Consumer Product Safety Commission addresses are: Final Paper 9 All fireworks device intended or sold to consumers except for firecrackers must meet the performance requirements located at Title 16, Part 1507 of the Code of Federal Regulations. Performance requirements ensure that fireworks work properly and safely. Specifically: 1. Fuses must resist side ignition and must burn for at least 3 but not more than 9 seconds. 2. The fuse must support twice the weight of the device to which it is attached or the weight plus 8 ounces, whichever is less; 3. The shortest dimension of the base of a fireworks device that stands upright must be at least 1/3 of the overall height of device or must pass a 12 degree tilt test. 4. Devices must be sealed to prevent leakage of pyrotechnic material at any time. 5. Devices must not exhibit burnout or blowout. 6. Handles and spikes must be securely attached. Handles must be at least 4 inches long, and spikes must be at least 2 inches long and have a blunt tip; 7. Wheels must have drivers securely attached; 8. Toy smoke devices must not burst or produce excessive external flame during operation; 9. Rockets must have sticks which are straight, rigid, and which remain securely attached. 10. Party poppers must not have more than 0.25 grains of pyrotechnic composition, nor have paper or plastic inserts which ignite during operation. 11. Fireworks must not contain the following chemicals: arsenic sulfide, arsenates, arsenites, boron, chlorates, gallates, gallic acid, magnesium, mercury salts, phosphorous, picrates, picric acid, thiocyanates, titanium, or zirconium. 12. Large multipletube mine and shell devices with any tube measuring 1.5 inches or more in inside diameter must not have a minimum tip angle of less than 60 degrees. Acme Fireworks moving from a sole proprietorship to a LLC is the right business decision for our business, there will be growth not only with new employees but also with our production size. Ensuring that are a limited liability company, you the owner will have the protection from personal liability for business decisions that you will need moving forward. If anything were to Final Paper 10 happen at Acme Fireworks to the extent of bankruptcy or lawsuits, your personal assets will be protected from any and all lawsuits. I have learned that here will always be liabilities to owning, production, retailing and using of our fireworks but as long as the regulations and safety measures are followed, as I discussed in this paper there will be a reduced amount of risk to Acme Fireworks. References 1.) Rogers, S. (2012). Essentials of Business Law. San Diego, CA: Bridgepoint Education, Inc. 2.) Cornell Law, 2015. Construction of Uniform Commercial Code to Promote its Purposes and Policies: Applicability of Supplemental Principles of Law Retrieved from https://www.law.cornell.edu/ucc/1/1103 3.) Cunningham, L 2013. Top Differences Between the UCC and the Common Law of Contracts. Retrieved from http://concurringopinions.com/archives/2013/07/top differencesbetweentheuccandthecommonlawofcontracts.html 4.) Consumer Product Safety Commission. 2001 Fireworks Business Guidance. Retrieved from: http://www.cpsc.gov/en/BusinessManufacturing/BusinessEducation/Business Guidance/Fireworks/ 5.) Limited Liability Company (LLC). (n.d.). The U.S. Small Business Administration Retrieved from: http://www.sba.gov/content/limitedliabilitycompanyllc Final Paper 11 6.) Regional Business News. 2003 Burn victims file lawsuits against fireworks company after explosions. Retrieved from: http://eds.b.ebscohost.com 7.) Sole Proprietorship 2015 The U.S. Small Business Administration Retrieved from: http://www.sba.gov/content/soleproprietorship0 8.) Medina, M. 2012 Claim Management “When fireworks GO from Ooh’s and Aah’s to “Oh My God” Retrieved from http://claimsmanagement.theclm.org/home/article/When FireworksGofromOoh%E2%80%99sandAah%E2%80%99stoOhMyGod
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