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(Solved): Scenario I - Business OrganizationsYolanda, Ginny, and Sara met while working for the Campus Subs in ...


Scenario I - Business Organizations

Yolanda, Ginny, and Sara met while working for the Campus Subs in Knoxville, Tennessee. Yolanda was attending college to earn a business degree in hospitality. Ginny was attending culinary school to become a chef, and Sara was a recent graduate in sales and marketing. The three ladies decided to open their own soup and sandwich restaurant on wheels, also known as a food truck. They planned to start small with one truck but had big dreams to own a whole fleet of trucks that served a variety of foods.

Yolanda took a business law class and remembers there are several forms for organizing businesses. The ladies have come to you for advice about the various forms of business organizations.

  • Evaluate three forms of business organizations including advantages and disadvantages related to the business the ladies plan to operate. At least one of the options must be the LLC or LLP.
  • Select a business form for the friends and defend your choice.
  • Explain the requirements for starting that form of business in your state.

Scenario 2—LLC Liability

Plaintiffs Karl and Ginny Drake were injured by lead paint while living in a house owned by Riverwood Homes, LLC. The plaintiffs sued Bill Ding, a member of the LLC at the time it owned the property, alleging that he was liable for their injuries. Ding had limited involvement with the property. He has never visited the property, and neither he nor the LLC was aware that the plaintiffs were occupying the property until after the LLC acquired it. Once they realized this fact, they took legal action to have the plaintiffs removed. The applicable housing code imposes liability on any individual who "owns, holds, or controls" the title to the property.

  • Is Ding liable for the plaintiffs' injuries?
  • What are the policy arguments in favor of both parties?


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Scenario I - Business Organizations

In evaluating three forms of business organizations for Yolanda, Ginny, and Sara's soup and sandwich food truck business, the following options can be considered:


Sole Proprietorship:

Advantages: Simple and inexpensive to set up and operate. The owners have complete control and decision-making power. Tax reporting is straightforward, as profits and losses are reported on the owner's personal tax return.
Disadvantages: The owner has unlimited personal liability for the business's debts and obligations. It may be challenging to raise capital or secure loans based on the sole proprietor's personal credit.
Partnership:

Advantages: Relatively easy and inexpensive to establish. Each partner brings different skills and resources to the business. Partners can share the workload and decision-making responsibilities.
Disadvantages: Partners have joint and several liability, meaning they are personally responsible for the partnership's debts and the actions of other partners. Disagreements and conflicts among partners can arise, potentially affecting the business's operations.
Limited Liability Company (LLC) or Limited Liability Partnership (LLP):

Advantages: Owners have limited personal liability for the company's debts and obligations. This means their personal assets are generally protected from business-related liabilities. Flexibility in management and tax options. Can attract investors by offering ownership interests.
Disadvantages: More complex to set up and operate compared to sole proprietorships and partnerships. LLCs require formal organization and maintenance, including filing articles of organization and operating agreements. LLPs are typically restricted to certain professional services fields.
Based on the advantages and disadvantages, the most suitable option for the friends' food truck business would be a Limited Liability Company (LLC). This choice would provide personal liability protection for Yolanda, Ginny, and Sara, shielding their personal assets from business liabilities. Additionally, the flexibility in management and tax options would be beneficial as they plan to expand their business and potentially attract investors.

The requirements for starting an LLC can vary by state, but generally, the process involves the following steps in Tennessee:

Choose a name for the LLC: The name must be unique and not already in use by another business entity in the state.

File Articles of Organization: Prepare and file the Articles of Organization with the Tennessee Secretary of State. This document typically includes the LLC's name, purpose, registered agent information, and management structure.



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