Answer 4 Questions Then Debate This (Business Law)

Answer 4 Questions Then Debate This (Business Law)

Question 1: Under what theory might the court, in this case, make an exception to the limited liability of shareholders and hold Sharp personally liable for the damages? What factors would be relevant to the court’s decision?

It is true that under the limited liability clause, Sharps’ assets could not be used to pay the firm’s liabilities. However, Away Fork limited liability and the court could still incriminate Mr. Sharp because he was the manager of the Chickasaw Club. In its determination of the case, the court could base its decisions on the fact that as a manager, Sharp failed to carry out his duty of care as required by not checking Pursley’s age before allowing her to drink from the club. The city ordinance requires the club management to check young people to verify their age to ensure that they are over 18 years old.[1] Moreover, the management did not deny Pursley entry into the club based on the fact that she was already intoxicated. Allowing her to drink more was suicidal, and the club management did not care. Sharp could also be held liable because the management allowed Pursley to enter the club at 12:45 am, which is an odd hour for a person of such age.

Question 2: Suppose that Chickasaw’s articles of incorporation failed to describe the corporation’s purpose or management structure as required by state law. Would the court be likely to rule that Sharp is personally liable to Dancause on that basis? Why or why not?

Suppose that Chickasaw’s article of association failed to describe the corporation’s purpose or the management structure as stipulated in the state law. The court could not only hold Sharp liable but would hold all shareholders liable. The court would assume that every member is the manager of the Chickasaw, and thus, all of them would be liable for the damages.[2] It is a big mistake for the firm to fail to describe its management structure. To punish the firm for this mistake, all members would be liable for the mistake.

Question 3: Suppose that the club extended credit to its regular patrons to maintain a loyal clientele, although neither the articles of incorporation nor the corporate bylaws authorized this practice. Would the corporation likely have the power to engage in this activity? Explain.

The corporation has the power to extend credit to its customers to retain them. There is no problem when a club decides to give credit to its clients since it is one of the business strategies clubs use to attract and retain customers. Thus, even if there is a clause or no clause in its article of incorporation, the club is free to extend credit to the members it trusts as a business strategy. However, if the clients fail to repay, it will be hard for the club to sue the members because it has no such provisions in its articles of incorporation.[3] It is assumed that if the club extends credits to its clients to retain them, it will be doing this at its risk. If a customer fails to pay, no law will hold them liable.

Question 4 How would the court classify Chickasaw Club, Inc.—domestic or foreign, public or private?

The court will classify the Chickasaw Club as private because private individuals own it. Chickasaw is a limited liability private corporation, meaning that the shareholder’s property cannot be sold to offset the company’s liabilities.

Debate

Indeed, the sole shareholder of an S corporation like Chickasaw should not avoid liability for the torts committed by the employees because of the urgent law. The torts committed by the employees make the employer liable. In other words, an employer cannot distance himself from the torts omitted by the agents or employees. Sharp, being a sole shareholder in Chickasaw, cannot evade the liabilities from the torts that his employees have committed.

Bibliography

Miller, R., 2017. Business law today. Cengage Learning

[1] Miller, R., 2017. Business law today. Cengage Learning.

[2] Miller, R., 2017

[3] Miller, R., 2017

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Answer 4 Questions Then Debate This (Business Law)

Answer the 4 questions passed on the information given. Then discuss your position on the debate this topic.

Debate This: S Corporations – Group 9From Business Law II
Debate This: S Corporations
Chapter 33, p.742

William Sharp was the sole shareholder and manager of Chickasaw Club, Inc., an S corporation that operated a popular nightclub of the same name in Columbus, Georgia. Sharp maintained a corporate checking account but paid the club’s employees, suppliers, and entertainers in cash out of the club’s proceeds. Sharp owned the property on which the club was located. He rented it to the club but made mortgage payments out of the club’s proceeds and often paid other personal expenses with Chickasaw corporate funds.

At 12:45 a.m. on July 31, eighteen-year-old Aubrey Lynn Pursley, who was already intoxicated, entered the Chickasaw Club. Chickasaw employees did not check Pursley’s identification to verify her age, as required by a city ordinance. Pursley drank more alcohol at Chickasaw and was visibly intoxicated when she left the club at 3:00 a.m. with a beer in her hand. Shortly afterward, Pursley lost control of her car, struck a tree, and was killed. Joseph Dancause, Pursley’s stepfather, filed a tort lawsuit against Chickasaw Club and William Sharp. Using the information presented in the chapter, answer the following questions.

1. Under what theory might the court in this case make an exception to the limited liability of share-holders and hold Sharp personally liable for the damages? What factors would be relevant to the court’s decision?

2. Suppose that Chickasaw’s articles of incorporation failed to describe the corporation’s purpose or management structure as required by state law. Would the court be likely to rule that Sharp is personally liable to Dancause on that basis? Why or why not?

3. Suppose that the club extended credit to its regular patrons in an effort to maintain a loyal clientele, although neither the articles of incorporation nor the corporate bylaws authorized this practice. Would the corporation likely have the power to engage in this activity? Explain.

4. How would the court classify Chickasaw Club, Inc.—domestic or foreign, public or private?

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