Acme Fireworks is a fireworks retailer that sells fireworks, puts on ground display fireworks, and large aerial displays fireworks. Acme Fireworks has been a sole proprietorship since it began two years ago. At this time the owner is receiving inquiries as to Acme Fireworks ability to create fireworks displays on a regular basis. CITATION Rog12 \l 1033 (Rogers, 2012). In anticipation of increased business, the owner of Acme Fireworks is in need of some information. This prospectus is going to inform the owner as to: Whether or not the business will be governed by common law or the Uniform Commercial Code. Analyze whether or not the owner has any actual contracts.
Explain the potential personal liability to Acme Fireworks is someone is injured by a stray firework. Discuss different employment types while discussing the advantages and disadvantages of each type as it applies to Acme Fireworks. And finally, give suggestions as to why Acme Fireworks should no longer be a sole proprietorship. When it comes to contracts, it is important to understand that there are two different bodies of law that come into play, the Uniform Commercial Code (UCC) and the common law of contracts. The difference between the UCC and the common law contract can make a huge difference in the outcome of a contract dispute. This could be the difference between being able to collect punitive damages, discharge or modify a contract, be able to sue under breach of contract, and whether or not there truly a legally recognizable contract after all CITATION Gun12 \l 1033 (Denton, 2012). It is important to understand the type of contract governed by each body of law.
The UCC applies to the sale of goods and securities, and common law of contracts applies to contracts for services, real estate, insurance, intangible assets, and employment CITATION Gun12 \l 1033 (Denton, 2012). If the contract should happen to be for both the sale of goods and for securities, the dominant element would be in control of the contract CITATION Gun12 \l 1033 (Denton, 2012). Should Acme Fireworks have contracts with the inquiring businesses, these contracts would be governed under UCC rule. The contracts would be for both goods and services with goods being the dominant factor of the contracts. There would be more fireworks than there would be personnel. Hence, this would be the reasoning for a UCC contract. In order for the owner to have valid contracts with inquiring businesses there are five elements that must be present in order for the contracts to be valid. First there must be an offer. An offer is an invitation for another to enter into a contract CITATION Rog12 \l 1033 (Rogers, 2012).Then there is the need for acceptance.
Acceptance is the acquiescence to enter into a contract CITATION Rog12 \l 1033 (Rogers, 2012). Then there is consideration. Consideration is anything of legal value that is asked for and received as the price for entering into a contract CITATION Rog12 \l 1033 (Rogers, 2012). Now there is legality. Legality is the extent to which the contract is legal and not against public policy CITATION Rog12 \l 1033 (Rogers, 2012). Finally, there is capacity. Capacity is the mental competency to enter into a contract CITATION Rog12 \l 1033 (Rogers, 2012). Considering Acme Firework’s new “contracts”; Was there an offer? No, there was not an offer. The businesses were making inquiries, asking questions trying to find out what Acme Fireworks could handle. Was the acceptance? No, there was no acceptance. There were no contracts offered, therefore nothing to accept. Was there consideration? No, there was no consideration. Pricing of the firework displays was talked about, but that was just information given to answer question f the inquiry. Is there legality? Yes, when the contracts are made they will be legal as they will not be against public policy. Is there capacity? Yes, there is capacity.
It is safe to assume that the owner of Acme Fireworks and the owners of the other businesses are of sound mind and body therefore able to enter into legally binding contracts. So, did the owner have enforceable contracts? No, he did not. While there was legality and capacity; there was no offer, acceptance, or consideration present. Fireworks displays are beautiful and exciting, but they are also very dangerous. The operator of a fireworks display has a duty to fireworks are done in a safe way that does not injure spectators CITATION All13 \l 1033 (Business, 2013). To successfully sue a promoter of a firework display, it must be shown that the promoter failed to keep spectators at a reasonable safe distance CITATION All13 \l 1033 (Business, 2013). In order to sue the operator of a firework display it must be shown that the spectator was injured by the discharge of a fireworks or firework that did not explode properly CITATION All13 \l 1033 (Business, 2013). Should an injury occur negligence by the operator is presumed, as the operator is in sole control of firing the fireworks. Essentially, Acme Fireworks is going to want any such liabilities to be the responsibility of the company and not result in personal liability. Being a sole proprietorship Acme Fireworks will be liable for all debts and claims against the business. A lawsuit of this type could be financially devastating.
However, should Acme Fireworks take the time and effort to incorporate or to form a Limited Liability Company they would more than likely be protected to a significant degree from such personal injury CITATION All13 \l 1033 (Business, 2013) Should these contracts come into being, Acme Fireworks will need to hire more employees. But which type of employee should Acme Fireworks employ? The full-time employee works regular and on-going, between 35-45 hours a week, which includes non-wage entitlements and benefits like paid holiday leave, sick leave, and long service leave CITATION ASU14 \l 1033 (ASU, 2014). Part-time permanent work is regular and on-going, involves fewer hours than full-time and usually has set days or set hours. No benefits and entitlements are received by part-time employees. Casual work is on-going and involves irregular hours and hourly pay. Casual workers work on an as needed basis, which means that they work when they are needed CITATION ASU14 \l 1033 (ASU, 2014). There are no entitlements for casual workers since the entitlements are factored into 20% of the higher hourly rate that casual workers receive CITATION ASU14 \l 1033 (ASU, 2014).
Casuals usually receive hourly rates of pay based on a minimum 15% loading of normal or applicable hourly rates of pay CITATION ASU14 \l 1033 (ASU, 2014). Fixed term or contract employees are hired for a fixed period of time for a specific project or to replace an employee on sick leave or paternal leave CITATION ASU14 \l 1033 (ASU, 2014). This type of employee would need an agreement in writing that sets out the length of the employment contract. Fixed term employees are entitled to the same annual personal and other leave as full-time employees, but on a proportional basis for the period of their employment CITATION ASU14 \l 1033 (ASU, 2014) Piecework and commission only payment employees rather than being paid a wage or salary are paid by: Piecework – the paying f a specific amount for completing a specific task. Commission – the paying of a percentage for each sale made Retainer plus commission – the paying of a fixed amount plus commission. Should Acme Fireworks decide to hire more employees, my suggestion would be to hire casual workers. Casual workers do not expect to work all the time they work when they are needed. They would not have to give them any entitlements just work.
Should Acme Fireworks become so busy that they are working everyday then they might want to get some full time workers. But, as of right now go with the casual workers. Acme Fireworks has been a sole proprietorship since it began two years ago. As a sole proprietorship all liabilities for finances and operations are on the owner. The owner’s personal property is tied to the business, so the owner assumes a risk against his personal property should the business experience financial hardship. Profits and losses of the business are reported through the owner and are taxed at the individual rate. The sole proprietorship entity is the easiest entity to set up, but the owner will probably have to sell the business to retrieve his investment. Should Acme Fireworks become a partnership? A partnership has two or more owners that share equal control, unless the partnership agreement says otherwise or the entity is set up as a limited partnership CITATION Phi14 \l 1033 (Phillips, 2014). Like a sole partnership, profits and losses of the business flow through the partners and are taxed at the individual rate. Operating partners assume risks, both legally and financially.
Creditors can attempt to collect debts from the partner’s personal assets CITATION Phi14 \l 1033 (Phillips, 2014). To recoup their investment the partner is required to sell his interest in the business. With the potential for devastatingly high personal injury claims, this entity would not be the one for Acme Fireworks. This entity jeopardizes the personal assets of the businesses owners. A corporation? A corporation can have an unlimited number of owners, known as shareholders. This business entity remains separate from the owners in legal and financial matters CITATION Phi14 \l 1033 (Phillips, 2014). The profits and losses of a corporation are taxed at corporate rates, not individual rates.
Should the corporation realize a profit it is paid out to the shareholders who then report it as income and pay taxes on it at an individual rate CITATION Phi14 \l 1033 (Phillips, 2014). Corporations are taxed twice, once at the time of profits and losses and then again when the shareholders realize the dividends. Or a limited liability company? This entity is a partnership and a corporation mixed together. Owners are protected from personal liability like a corporation, but enjoy the tax advantages similar to a partnership. The LLC would be the entity I would suggest for Acme Fireworks due to the ability to be free from personal liability and the ability to be taxed at the lower partnership rate.
BIBLIOGRAPHY \l 1033 ASU. (2014). Employment Type Defin itions & Eligibility Summary. Retrieved from ASU: http://www.asu.edu Business, A. (2013, July 13). Fireworks Displays. Retrieved from Avoiding Personal Liability: http://www.allbusiness.com Denton, G. &. (2012). Thwe difference between a contract that falls undert the UCC and one that does not and why it is important to you. Retrieved from Gunderson & Denton at Law: http://www.gundersondenton.com/business/difference-contract-falls-ucc-important Phillips, C. (2014). Three Types of Business Entity. Retrieved from Small Business: http://www.smallbusiness.chron.com Rogers, S. (2012). Essentials of Bussiness Law. San Diego: Bridgepoint Education, Inc.
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