[Candy Company] Milton, Ava, and Hiro own a candy company. T…

Milton, Ava, and Hiro own a candy company. The business is failing and Milton is declared bankrupt by the bankruptcy court. Ava wants to keep the business running because she is sure she can turn it around. Hiro tells her that, it’s too late, the partnership is already over because of Milton. Ava tells him that no one has asked to end the partnership so they do not have to dissolve. The partnership debts include a loan to the bank, loans Ava made to the company, and the initial capital that all three partners invested. Milton has no money to pay any of their debts. If the bank loan cannot be paid off after sale of the partnership assets, who is liable for the remainder of the loan?

[Nail Salon] Thea and her friends Josef and Danny, all U.S….

Thea and her friends Josef and Danny, all U.S. citizens, want to open a nail salon. They would all like to avoid personal liability for debts of the business and/or wrongful acts of each other. They would also like to minimize taxation. Thea is in favor of a corporation and asks if there is any problem with that form of business. Josef and Danny say that they are concerned about double taxation with a corporation and that they are in favor of a partnership, even if personal liability is a concern. Thea said that she was concerned about the deductibility of losses if the corporate form was chosen. She did some research and suggested an S corporation to Josef and Danny which she claimed would avoid the problem of double taxation. Is there an impediment to the business qualifying as an S Corporation, based on the information available?

[Car Repair] Gordon and Leo are partners in SafeT Car, a ful…

Gordon and Leo are partners in SafeT Car, a full service automotive repair company. Leo does nearly all of the day-to-day work as Gordon is thinking about retiring. When Leo was moving a customer’s car last week, he accidentally collided with the garage door, and the door had to be replaced at a cost of $6,000. Leo recently met with BigBox stores about a potential deal by which BigBox would set up a SafeT Car shop in every BigBox store nationwide. Leo signed an agreement to open a “test” store in one BigBox store. Leo hasn’t told Gordon yet, because Gordon hasn’t been in the office in a month. Gordon opens The Oil Place, an express oil change company, which he plans to have his sons operate in his retirement. When Leo learns about The Oil Place, he threatens to sue Gordon for breach of duty because Leo is sick of doing all the work at SafeT Car while Gordon was apparently opening a competing business. Gordon tells Leo that he hasn’t breached any duty and they don’t have a written agreement that restricts Gordon from opening his own store with his sons. Gordon also tells Leo that the $6,000 for the damaged door is coming out of Leo’s pocket. Leo, who’s thinking about the potential deal about BigBox, tells Gordon he wants to split up the partnership. Does Leo have any obligation to tell Gordon about the BigBox deal?

[Fishy Fiasco] James agreed to be a limited partner in Ingri…

James agreed to be a limited partner in Ingrid and Darnell’s tropical fish importing business. Ingrid and Darnell were general partners. James contributed $10,000 to the partnership as his capital contribution. The partnership made a profit of $30,000 the first year. James was paid nothing. When he inquired, Ingrid told him that a limited partner was only entitled to a share of profits as approved by the general partners and that perhaps things would be better the next year. The next year, however, importation was banned because of a fish disease, and the partnership lost money and owed debts of $60,000. At the end of the year, Ingrid and Darnell asked James to contribute $20,000 to cover the debts. When James complained about the amount, Darnell told him that he and Ingrid were being overly reasonable and that James actually was legally liable for an even larger percentage. In an attempt to keep the business afloat, James told Ingrid and Darnell that they should consider suing a customer who had not paid a large account. Ingrid and Darnell replied, however, that they were morally opposed to lawsuits and that they had the final say on litigation. Which statement is true regarding any responsibility James has to share in losses?

[R&R Landscaping, LLC] R&R Landscaping, LLC, is registered a…

R&R Landscaping, LLC, is registered as a limited liability company in Illinois. R&R provides corporate landscape design and maintenance. During a large corporate project near Chicago, the driver of R&R’s bulldozer lost control, went into oncoming traffic, and caused injuries to Viktor. Viktor wants to file a lawsuit and, after research, learns that R&R is owned by Rohan, an Illinois resident, and Roland, an Indiana resident, and that R&R filed articles of organization in Illinois and a certificate of authority in Indiana. Would Rohan and Roland likely be held liable for Viktor’s injuries?

[Skateboard Growth] Both Tyler and Byron were presidents of…

Both Tyler and Byron were presidents of small corporations involved with manufacturing and selling skateboards. Tyler’s store was called “Thrasher Skateboard” and Byron’s business was called “Skateboard for Health.” Because a large sports store was coming into town, they, along with the boards of directors of the two companies and all shareholders, decided that it would be a good idea to combine the businesses. They decided to retain the name “Skateboard for Health.” However, Tyler was concerned with the change because, on behalf of his company, he was contemplating filing a lawsuit against Sean who had purchased 10 custom skateboards and had not paid for them. He was excited, however, about the prospect of not being liable for a lawsuit he expects to be filed by Alec who fell and sustained a serious ankle sprain and medical bills when a wheel came off of a skateboard sold by Tyler’s corporation. After investigation, Tyler is aware that the wheel was negligently attached to the skateboard. Tyler told Byron that one reason he wanted to retain Byron’s name was to prevent Alec from being able to recover against him. Which of the following is the appropriate term for the action contemplated by Tyler and Byron to combine the businesses under the name “Skateboard for Health”?

[Tutoring Concerns] André and Sasha want to go into business…

André and Sasha want to go into business together and plan on offering a tutoring service to high school and college students. André proposes that they share control of the business and split profits equally and not bother with a written agreement. Sasha, however, is concerned about being able to pay their debts, since they will have to rent tutoring space, and purchase computers and supplies. She is also concerned about parents and students who may sue if their test scores do not improve. She tells André that she just bought a new boat and car, and that she does not want her assets to be in jeopardy. She tells André that they should form a corporation to shield their personal assets. André, however, tells Sasha that their personal assets are not in danger with his proposal because they are a business and that, furthermore, forming a corporation would result in a tax being imposed twice. Is André correct in his assertion that by sharing control of the business and splitting profits equally there could be no personal liability for debts?