Acme Fireworks
Student’s Name
Institutional Affiliation
Course
Professor’s Name
Date
Acme Fireworks
The business sector has rules and regulations that define how operations are conducted. According to Wevers (2021), business law outlines protocols for resolving disputes, maintaining orders, and protecting rights and liberties. For this reason, it is a vital element for the private sector and government operations. Since Acme Fireworks was established as a sole proprietorship, the manager feels that it is appropriate to change the business structure and regulations to enhance operations. The business growth is significant as it currently has 15 employees since it was initiated. With the increasing fireworks display inquiries from other organizations, the business needs to expand and change its contracts to satisfy the demand (Gitman et al., 2018). Even though the owner intends to recruit new employees, he is hesitant about employee protection lawsuits that will emerge if the client orders decline. In this case, the manager fears that the business will not pay employees and this would damage Acme Fireworks’ reputation. Besides, the proprietor wants to change the business identity but he is undecided about the most appropriate business form that will fulfill the emerging markets’ needs. As the owner wants to enhance business organization performance, the paper unveils useful information to improve Acme Fireworks’ management and operations.
Contractual Laws and Governance
Contractual laws govern business relationships. According to UpCounsel (2019), Common Law originated in England and it encompasses regulations that are formed and enforced through court decisions. It controls contracts that are negotiated depending on the performance. The Common Law applies to Acme Fireworks since the enterprise uses actual labor to offer services to clients (UpCounsel, 2019). Business performances under the Common Law vary based on the size of the display and workload. On the other hand, Uniform Commercial Code (UCC) entails regulations derived from the Common Law that harmonize business to business or state to state transactions (UpCounsel, 2019). Consequently, UCC controls interstate commerce activities since it uses a single code to enhance and facilitate business operations in different geographical localities.
“Common Law” hardly revokes option contracts. However, it emphasizes the identity of the offer, nature of work, performance time, price, and quantity (UpCounsel, 2019). As a result, changes made to a contract including counter-offers and quantities lead to rejections as they defy “Common Law.” In contrast, UCC accommodates minor changes to the original contract, especially in terms of quantity. In this case, UCC controls commercial transactions in the 50 states (UpCounsel, 2019). Therefore, UCC offers that companies relay through writing are irrevocable. The displays fall under UCC before fireworks are set up since no operation or service requiring labor is involved. However, Common Law applies when the fireworks are transferred to the customer’s location since labor and services are involved (UpCounsel, 2019). The two contract terms govern business operations regardless of the size. I would recommend a UCC contract for the Acme Fireworks owner as opposed to a Common Law. UCC guarantees flexible terms that fulfill Acme Fireworks’ commercial needs.
Contractual Elements
A contract encompasses a legitimately enforceable pact. Consequently, it applies to situations where parties or two individuals’ voluntary assent to have a legally binding agreement (JEC, 2022). The mutual accord principle governs contract agreement. The two parties involved in a contract include the offeror and the offeree. The latter accepts a business proposition from the former (JEC, 2022). An enforceable contract has five essential elements including capacity, legality, consideration, acceptance, and offer. Acme owner agreed with other businesses about the fireworks display. As a result, the contract was lawful as the proprietor made an offer and customers accepted the deal (JEC, 2022). The contract was also legal since compensation was agreed upon and services were offered. Consideration is another contract element depicted in the scene since the Acme Fireworks manager considers getting an insurance cover to cushion the business from damages or lawsuits initiated by employees or customers (JEC, 2022). The clients and Acme could engage in a contract agreement as the customers could pay for the services provided by Acme Fireworks. In addition, consent was evident in the agreement as other businesses agreed voluntarily to enter into a contract with the proprietor and had to honor the terms for the specified time limit (JEC, 2022). Therefore, the owner of Acme Fireworks endorsed an enforceable contract agreement with other businesses since the deals entailed contract essentials.
Personal Liability to Acme Fireworks in Case of an Accident
Business regulations require enterprises to fulfill their liability obligations. Even though sole proprietorship is easy to control, the owner is personally liable for the business debts. In this case, creditors may seize the owner’s assets through lawsuits to satisfy debt obligations (Wevers, 2021). Besides debt liability, the proprietor settles injuries and damages encountered by the business. As a sole proprietorship enterprise, Acme Fireworks owner is liable if a stray firework from the display injures a spectator at the establishment and its environs. As a result, the proprietor’s assets could be seized to compensate for the spectator injuries that arise (Wevers, 2021). The business owner pays business obligation in the case of a sole proprietorship since it lacks legal protection. However, the owner should consider other forms of business to protect customers, employees, and personal assets. The worker who puts off the fireworks is recognized as an agent or associate of Acme’s business (Beatty et al., 2018). For this reason, the agent is anticipated to fulfill legal provisions such as accountability, performance, obedience, and loyalty by accomplishing assigned tasks.
Acme Fireworks should honor employer-employee agreement provisions including reimbursement, indemnification, compensation, and cooperation. Likewise, Acme should enforce safety measures by ensuring that employees are trained and equipped with the skills required to conduct assigned duties (Beatty et al., 2018). Training and capacity building reduce workplace accidents associated with negligence and incompetence. Besides compensating employees for their performances, Acme should ensure that workers receive rightful reimbursement for the losses incurred during their service as per the agency agreement (Beatty et al., 2018). The agents, however, are not liable or responsible for accidents that affect a bystander if they were following operation guidelines issued by Acme Fireworks. Consequently, an insurance cover is a vital component during contract negotiations since it protects the owner and the agent when eventualities arise.
Employment Types and Relationships
Work conditions define the legal relationship between employees and employers. In this case, managers assign duties to workers during day-to-day business operations. The social security and labor laws outline workers’ obligations and employers’ rights in the workplace (Gitman et al., 2018). The workforce can be classified as independent contractors or employees. However, employers incur legal charges if they violate labor regulations. The common law establishes a lawful business relationship between a company and a worker (Gitman et al., 2018). The contract regulations define compensation terms, remuneration procedures, employers’ obligations, employees’ powers, and performance agreements. For this reason, parties seal the contract agreement by signing paperwork. Business relationships are of four types according to the Internal Revenue Service (IRS); statutory non-employee, statutory employee, employee, and independent contractor (Gitman et al., 2018). An employee refers to a worker that is controlled by an employer. Consequently, an employee receives instructions from managers establishing how to perform assigned duties. The common law requires employers to pay unemployment, social security, and Medicare taxes on their workers and withhold income taxes (Gitman et al., 2018). The employer-employee relationship hardly applies to an independent contractor and the company. As a result, an independent contractor uses its supplies and tools to accomplish assigned duties as per the agreement with the firm. Employers neither pay taxes nor withhold independent contractors’ income (Gitman et al., 2018). A statutory employee is an independent contractor that has a service contract with the employer and provides services continuingly. However, the employer avails equipment and supplies used to accomplish such services. On the other hand, a statutory non-employee is a self-employed individual who either sells a company product directly or acts as an agent (Gitman et al., 2018). Therefore, the Acme Fireworks manager should consider employment relationships before recruiting additional staff.
Acme Fireworks has fifteen employees currently. However, the business requires additional workers to provide the labor needed to honor customers’ orders (Gitman et al., 2018). For that reason, Acme Fireworks need to hire employees or independent contractors to ensure that it delivers quality services to clients during each show. Even though the business can use different techniques to get additional workers on board, the owner is liable and responsible for all parties he enters into a working relationship with (Gitman et al., 2018). Acme Fireworks should observe different employment terms for employees and independent contractors. The owner is not liable for damages caused by independent contractors but must remit additional incentives to them as per the employment regulations (Gitman et al., 2018). Unlike the case of independent contractors, Acme Fireworks must withhold some percentage of employees’ income for child support and garnishments. The business should not cover independent contractors’ Medicare and Social Security demands since the employment regulations deprive them of fringe benefits including health cover and pension (Gitman et al., 2018). Since independent contractors are not regular business employees, they lack the legal mandate under the statutes to initiate employee discrimination lawsuits against Acme Fireworks. Independent contractor employment claims are costly to defend. The business may ignore compensations for liability, death, or injury caused by independent contractors since such obligations only apply in the case of a business employee (Gitman et al., 2018). Despite the prominent disadvantages, the use of independent contractors guarantees Acme Fireworks protection from injuries or liabilities. However, independent contractors ruin business-client relationships as the client hardly regulates the contractor’s performance and service delivery quality (Gitman et al., 2018). Likewise, since the business has a contractual relationship with the contractor, the client lacks the power to terminate contactor services at will. In this case, the client incurs legal costs associated with a breach of contract upon terminating the relationship. Therefore, the client must observe the working relationship by honoring the contract legality.
Recommendation of A New Business Entity
Business forms determine management structure and operation protocols. Since Acme Fireworks is expanding and it is receiving bigger contracts from other clients, I recommend the business should operate as a Limited Liability Company (LLC) and drop sole proprietorship status (Wevers, 2021). An LLC is an efficient business organization as it combines the management and operation features of a corporation and a partnership. Business debts are shared equally among parties in a general partnership. On the other hand, one partner is responsible for the business debts in a limited liability partnership. For this reason, a Limited Liability Company is a legal entity and the business settles its obligations. Consequently, the owner’s assets cannot be seized, instead, liquidation targets business assets to settle outstanding debts (Beatty et al., 2018). Likewise, an LLC guarantees “changing order” rights to creditors, thus, it will promote business growth by enhancing supply chain operations. Even though changing order regulations require an LLC to settle creditors’ distribution costs, a creditor lacks the powers to compel the company to make distributions (Beatty et al., 2018). Although changing orders apply to LLCs and partnerships, some states limit such provisions for partnership business enterprises. However, the creditors have the legal obligation to file lawsuits against an LLC that defies a contract agreement. Besides receiving individual state recognition, a Limited Liability Company obtains considerable tax benefits compared to a corporation (Beatty et al., 2018). As a result, Acme Fireworks will expand and generate more profits since it will establish branches in other states. The costs of changing the business to a Limited Liability Company are less compared to that of segregating it into multiple entities. Unlike multiple entities, an LLC encompasses less organizational documentation. Consequently, the business should change to an LLC since it safeguards the owner’s assets, shields company employees, and protects creditors’ interests.
Conclusion
Business entity influences operations and management practices. Acme Fireworks proprietor should change the business organization to a Limited Liability Company to satisfy the clients’ needs. An LLC will promote business expansion; thus, it will effectively process the increasing customer orders. I believe an LLC will recruit more employees and guarantee protection against liabilities. Unlike a sole proprietorship, an LLC has unlimited life as its operations are independent of the owner’s health status. Transforming the business to a Limited Liability Company status will also reinforce confidence in other corporate organizations to do business with Acme Fireworks. For this reason, the business will generate more revenue due to the increasing number of clients. The business will penetrate markets in different states in the U.S. as well as other nations as a Limited Liability Company. In this case, more orders will be streaming in as customers will require fireworks and displays to delight the audience during gatherings and parties. Since the business deals in fireworks, it will encounter a higher risk of bystanders’ or employees’ injuries as it expands to other territories. However, a Limited Liability Company status guarantees insurance to damages of whatever cause and limits lawsuits against Acme Fireworks. I am convinced that the owner is enthralled with my proposal to change the business entity to an LLC from a sole proprietorship. The proposal will facilitate business expansion over the years as it will recruit more employees and penetrate new markets. The existing UCC regulations also permit business entity transition. Therefore, the owner will sell products to other states, enhance transaction efficiency, and receive legal liability protection.
References
Beatty, J. F., Samuelson, S. S., & Abril, P. S. (2018). Essentials of Business Law. Cengage Learning.
Gitman, L. J., McDaniel, C., Shah, A. J., Reece, M., Koffel, L., Talsma, B., Hyatt, J. C. (2018). Introduction to Business. OpenStax College, Rice University.
JEC. (2022). Elements of A Contract. http://jec.unm.edu/education/online-training/contract-lawtutorial/contract-fundamentals-part-2
UpCounsel. (2022). Common-Law Contracts vs. UCC: Everything You Need to Know. https://www.upcounsel.com/common-law-contracts-vs-ucc
Wevers, H. (2021). A Basic Guide to International Business Law. Routledge