BUSINESS LAW MEMORANDUM 8
Running head: Business law memorandum 1
Business Law Memorandum
Name: Abby Olson
Institution: Southern New Hampshire University
Date: November 13th 2021
To: Fred and Sally
From: Attorney
Date: November 12, 2021
Subject: Prerequisites before family business formation.
The purpose of the memo is to address the various issues regarding the factors in business law that need to be considered before business formation. The characteristics that have to be considered are in categories such as business entities, product liability, agency relationship, real property, manufacturer possession rights, personal property, liability issues, estate planning, and transfer ownership. Each case is specific and has its qualities that every person thinking of starting a business needs to put into consideration.
Business Entity
A business entity, which is the legal structure of a business exists in different types. The types include sole proprietorships, partnerships, corporations, limited liability companies, and limited liability partnerships (Asha,2021). Sole proprietorships are business entities owned by an individual and those individuals manage every aspect of the business. Partnerships are business entities that are managed by two or more people who have come together to form the business and bear all the liabilities that come with it (Asha,2021). Another type is the corporation which is a legal entity and separate from its owners. Based on law they possess the same qualities as individuals since they can borrow money, enter contracts, hire new employees, own assets, pay taxes among others. Lastly, limited liability companies or partnerships are businesses that protect their owners from personal responsibilities from their debts or liabilities (Asha,2021).
Product liability law
This is a type of law that provides those affected by dangerous products with legal help for any type of injuries they might have suffered from (Hbr, 2021). This is whereby the producer or manufacturer is held accountable for the production of a defective product when a plaintiff who is the consumer of the product for this case, syrup, reports the case to a court of law (Hbr, 2021) .
Agency relationships
This is where the business entity has a trustful relationship where an individual called the principal permits the agent in this case Sam (mvorganizing,2021). He is an employee to the business and the one being given the trust to deliver the business’ syrup products and he is subject to his dad’s instructions in the running and management of the business (mvorganizing, 2021).
Real property
This refers to the land and buildings that an individual owns (Nycbar, 2021). The real estate law governs who may own the land or use it. Thus, the owner is given rights to use the piece of land in whatever way they deem fit, exclude others, sell or give it away to the person of their choice. In that regard, the property owner may do all activities that he wants and conduct all types of businesses that he wishes to do as he has complete rights over the property (Jcfsandiego, 2021).
Possessory rights
It is the right of an individual to own a piece of property, business, or piece of land(Kelly, 2021).So in the case of the manufacturer, they have no possessory rights to the business since they are only manufacturing the products as a contract not as part of the initial business that had been formed(Kelly, 2021).
Personal property law
Personal property is anything besides land that can be owned thus it is mobile not like real estate (co.sherman.or, 2021). They are of two types: tangible and intangible. In this case, it is the tangible type since it deals with Sam’s van as his personal property to the business. Therefore, the van becomes part of the business assets and is still personal property so Sam must take insurance regarding it (co.sherman.or, 2021).
Estate planning issues
This is whereby the family gets plans to manage any sorts of risks that may occur at the end of life and beyond (Americanbar, 2021). Some issues may arise in the family if such plans are not set in place to prevent the arise of mistakes which include not having the plan in the first place, not updating such plans, not planning for disability, improper ownership of assets, estate liquidity, not taking into account the impact that income tax may have on you and the beneficiaries, not planning for beneficiaries and lastly not reviewing the impact of beneficiary decisions on the estate (Americanbar, 2021). Therefore, all these after plans have to be put into consideration to avoid such disagreements.
Estate planning vehicles
These are the options that a family may choose to handle their estate planning process which include trusts and wills (Jcfsandiego, 2021). Each has its own merits and demerits thus a family must weigh both options to consider the best estate planning vehicle. The most suitable estate planning vehicle is the one that proves more beneficial to the family than the others in terms of reducing the legal process that the beneficiaries may get the inheritance more easily (Jcfsandiego, 2021).
Conclusion
Considering the family situation, there are many business entities it can consider starting but narrowing down is better while considering personal and business benefits focusing on the features of each entity (asha, 2021). For the product liability law, insurance should be taken to protect the business in case the consumer tends to sue the business when they consume a defective product (hbr,2021). This will save the business in terms of the capital it has to prevent depletion whereby the insurance company will come in place and stand for the business. Focusing on the agency relationship, Sam is on an agency relationship since he is trusted by the business owner in this case his dad to supply the syrup product to the local drug store and grocer.
The business is again advised to take insurance against the real property law so that they can do all they want in terms of the outbuilding in the family land that they own and the buildings that they will be conducting business in (Nycbar, 2021). The location of the property is also another issue that the business is supposed to take into account. It is recommended that the business take the necessary actions regarding the insurance policy on family land so that the business is allowed by law to conduct the businesses without fear since they own the land and they can do all activities regarding the business there (Nycbar, 2021).
The possessory rights should also be on the business owner (Fred) by taking corresponding law measures with the government so that the manufacturer is only related to the two partners in the business(Kelly, 2021). Regarding personal property, the potential issues that may arise in the use of Sam’s car are accidents or any misfortune thus there might be disagreements between the father and son. This is prevented by the issuance of insurance and proper care on the property (co.sherman.or, 2021). Using the car also exposes it to potential liabilities such as maintenance costs, negligence, or unprecedented accidents this is because risks are not anticipated and normal repair issues that arise from the use of the car(Kelly, 2021).
Real estate planning issues that may arise include family’s lack of harmony, attorney’s fees, successor fiduciaries, joint accounts, probate, and contingent beneficiaries (Americanbar, 2021). These are potential threats that may arise before both siblings agree on who is to own the business later on after the current owner ceases to be the owner. Stress and disagreements are common to all families after the death of the business owner due to wrong estate planning, the family may lack the fees to pay the attorney, lack of clearly stated trustee may lead to court proceedings, probate can lead to the property being held and beneficiaries being forced to go court even though the court supervises the administration of the estate plus filing fees and lack of privacy may arise(Americanbar, 2021). A joint account adds extra liability and lack of contingency beneficiaries is another potential problem that may arise.
An estate planning vehicle is a trust or a family partnership (Jcfsandiego, 2021). Trusts and wills are the most common and those that can be used as their estate planning vehicles. Will has merits such as reduction of legal fees, expediting the legal process, and reducing confusion. The demerits include subject to probate and challenges against the validity and become public records.
Trusts which say how and when to pass the assets to beneficiaries is different since it states who is wanted to manage the owners’ affairs in case of a serious medical issue that prevents decision-making (Jcfsandiego, 2021). So trusts are the preferred estate planning vehicle since it boasts of benefits such as avoiding probates if properly funded, protection from creditors, protecting family members not used to dealing with financial matters, support for children and spouses, ensures funding is still there for specific needs like education, health care among others(Hg, 2021).
Recommendation
A partnership in this case is a suitable choice. This is because the business has two participants in its formation thus it should be having at least two owners to the business. This is also a preferable choice since it is managed by people of the same family and they both suffer the losses incurred in the business excluding outsiders who may not be reliable to the losses in case they occur. The real property, possession rights, and estate planning are within the same family. Therefore, the business is assured of its continuity and growth since they both will contribute personal property to ensure its longevity.
Thank you,
Attorney.
References
2021. [online] Available at: [Accessed 12 November 2021].
Americanbar.org. 2021. Estate Planning Info & FAQs. [online] Available at: [Accessed 13 November 2021].
Asha.org. 2021. Types of Business Entities. [online] Available at: [Accessed 12 November 2021].
Harvard Business Review. 2021. Product Liability: You’re More Exposed Than You Think. [online] Available at: [Accessed 12 November 2021]. (hbr,2021)
Hg.org. 2021. [online] Available at: [Accessed 13 November 2021].
Jcfsandiego.org. 2021. Estate Planning Vehicles – Jewish Community Foundation. [online] Available at: [Accessed 13 November 2021].
Kelly, D., 2021. Dividing possessory rights.
New York City Bar – Legal Referral Service. 2021. Real Property Law – Land Ownership Law – Use of Land. [online] Available at: [Accessed 13 November 2021].
Sherman County. 2021. What is Business Personal Property? – Sherman County. [online] Available at: [Accessed 12 November 2021].
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