Running Head: BUS 307
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7-1 Final Project: Submit
BUS 307
SNHU
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Table of Contents
Case Study 1 .................................................................................................................................... 3
Case study 2 ..................................................................................................................................... 8
Case study 3 ................................................................................................................................... 13
References ..................................................................................................................................... 15
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Case Study 1
To: Fred and Sally
From: ABC
Date: March 15, 2022
Subject: Fred’s Miracle Cough syrup
The memo is based on the initial meeting and subsequent research relating to Fred’s new
business involving a miracle cough syrup. As per the discussion that was conducted, you would
like to market your product locally as well as in several national sectors. You intend to produce the
syrup on your farm and take Sam’s assistance in making the deliveries. After conducting research
on the new business idea, a number of issues have been identified, such as potential real property
issues, liability issues, management issues etc. have been identified. Ultimately, a suitable
recommendation has been made regarding the business type that must be adopted to introduce
Fred’s Miracle Cough syrup in the market. f
Business Entities
Some of the common types of business entities that exist include sole proprietorship,
partnership, limited liability company, and corporation. The sole proprietorship is a type of entity
that is owned by a single individual. It is considered to be one of the simplest legal forms of
business organizations that can come into existence. Such an entity is relatively simple to manage
and control. The owner can act as the chief decision-maker, and he is the one who is solely
responsible for the assets, profitability, expenses and income. The partnership is a common form
of business in which the owners have unlimited personal liability for the operations and actions of
the business. The owners are responsible for investing their personal funds, efforts and time into
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the business, and the partners share the profits or losses within them proportionately. Corporations
are the other type of business entity. They are considered to have a separate legal identity of their
own in which the owners have limited liability. The complexity in creating such a business entity
is high as compared to sole proprietorship and partnership. Additionally, it is legally cumbersome
to form such a business entity (Tulsian, 2002). A limited liability company offers protection just as
a corporate and it safeguards the owners from personal liability. It will offer managerial flexibility
and taxation benefits. f
Application of Product Liability Law
In every kind of business, there exist certain kinds of liabilities. Product liability refers to
the responsibility of the manufacturer of an offering to compensate for any kind of injury that may
arise due to the defective merchandise that is offered for sale. A manufacturer could be held liable
for manufacturing defects, product defects or deficient warnings relating to potential dangers of
using the product. A manufacturer can be dragged to the court of law in case his produce causes
any kind of harm to a person or a third party (Cohen & American Law Division, 2003). In the
specific case, a major product liability issue may arise because one of its key ingredients leads to a
severe reaction if it is taken along with aspirin. Even though his cough syrup is homeopathic, it can
lead to harm to the end-users in case they consume it without prior warning about the reaction.
Another issue that may arise relates to the product’s name. As per the Fair Packaging and Label
Act, businesses must clearly identify their product so that deceptive packaging can be prevented
(Fair Packaging and labeling act: Regulations under section 4 of the fair packaging and labeling
act. Federal Trade Commission, 2020). However, ‘Fred’s Miracle Cough syrup’ seems vague. f f
Agency Relationship
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An agency relationship is the arrangement between a principal and an agent in which one
party acts on behalf of the other party. Such an association can be created by an express contract or
by implied actions. An agent has the authority to legally bind the principal with third parties. In the
specific scenario, the involvement of Sam in the business can act as a critical asset since he owns a
van that can be used for making deliveries. A key concern relates to the agency relationship since
Sam is involved in the business. As he interacts with the business, his existence can be crucial.
Even though it is not essential to have a formal agreement with Sam, it is better to have a formal
agreement that can act so that it can be considered to be an agency relationship (Libretexts, 2021).
It would imply that Sam is Fred’s employee. Since the relationship between a principal and an
agency is contractual in nature, it is advisable to create an agreement that would give Sam the
authority to act on behalf of Fred. It would give Sam the authority to play a proactive role in the
business setting. Sam must ensure that all compliances are met while transporting the products in
the market.
Potential Real Property Issues
Another important area that must be given high priority relates to real property aspects. As
per the business idea, the cough syrup would be produced on the family farm, where the family
members would continue to stay. Personal property can be categorized into rea property as well as
personal property. The real property encompasses elements like land, building, etc., whereas
personal property involves movable goods such as furniture and fixtures. In the new business
context, one of the main real property issues that may arise is liability risk. In case a lawsuit is filed
against the business, the entity along with the entire family would be at risk. In order to mitigate
the risk, it is advisable to separate personal property from the business property. By separating real
property from personal property, they would have to find a separate property for accommodating
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the business. This could safeguard their homes in case a lawsuit is filed against the business.
Otherwise, the land could be subdivided for business purposes and for family purposes. Another
risk relates to a lack of compliance with zoning laws. As per zoning laws, rational planning must
be done so that private property is used without causing any kind of harm to existing residents
(Libre texts, 2021). As Fred’s family lives on the farm, it is critical to be extra cautious to ensure all
the relevant conditions relating to zoning laws are met. As the family resides on the same land,
compliance with zoning is critical. Zoning laws restrict the type of home-based businesses that are
permitted in residential areas. The farm may belong to the residential homestead head since Fred’s
family lives there.
Impact of manufacturing
The manufacturing of Fred’s Miracle Cough syrup in the family farm does not necessitate a
formal transfer of ownership or processionary rights, specifically when control is retained over the
new business. However, it would be wise to create a lease for the buildings that are being used for
business purposes. Such a step would help to segregate business assets and personal assets. It
would also create an opportunity to enjoy several benefits such as tax deductions, etc. Suitable
decisions must be made concerning the interests relating to real property ownership. f
Potential Personal Property issues
Since Sam would use his personal vehicle for the delivery purpose, potential issues relating
to personal property may arise. Some of the common issues include vehicle liability, the drafting
of the vehicle’s policies and documents and tax-related aspects relating to Sam’s van. The vehicle
liability issue may arise in case accidents occur. There is a need for relevant insurance so that such
liabilities would be covered. Vehicle policies need to be drafted highlighting the policies for the
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use of the vehicle. For example, some of the policies that could be integrated include the use of the
van for business purposes, abstinence from illegal use of the vehicle and ensuring that flexible
policies are introduced that can ensure the safety and security of the business in case any accidents
take place. Taxation is another important area that Sam must focus on while using his van for
business purposes. He must ensure that an in-depth record of all business-related expenses relating
to the use of the van is maintained. f
Liability Issues
The use of the personal vehicle by Sam in the business context exposes the business to
certain liability issues such as negligence. Such an issue may arise in case there is a negligent
hiring procedure. Thus, it is imperative for Fred to conduct an in-depth and detailed checking of
Sam’s driving records and other details before he is made responsible for making deliveries. In
case such checking is not carried out, the risk for the business may arise relating to poor driving or
instances of accidents. Due to such matters, the business could be dragged to the court of law. In
case the vehicle is borrowed by another party, and it is involved in some complicated situation or
event, it may also showcase neglectful behavior. Other issues apart from vehicle liability that may
arise are vehicle policies drafting, tax-related complexities and the possibility that commercial
auto insurance may not cover vehicle damage. f
Potential Estate Planning Issues and Estate Planning Vehicles
A number of potential estate planning issues may arise with regard to the business as well
as the family farm. In the specific context, Fred and Sam live on the farm along with their children
and grandchildren. One option is to have in place an estate plan. According to the Uniform Probate
Code (UPC), proper planning must be adopted relating to the succession of a property after the
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death of the owner of the property (Probate code. Probate Code - Uniform Law Commission,
2020). In the business context, suitable ‘will’ must be formed in advance so that ambiguity relating
to the estate can be curtailed to a considerable extent. There are other options that Fred and Sally
can consider apart from estate planning vehicles like family limited partnerships (FLP) and trusts.
FLP would act as a flexible planning tool based on which the family members could pool money
for the purpose of running the business project (Lieb, 2002). It would ensure that the next
generation can serve as limited partners while Fred and Sally could exert control over their syrup
business. The main advantage is reduced tax liability by issuing stock for the children (Lieb,
2002). The other option that can be considered is trust. This option would help in transferring the
legal title of properties to the trustee from the settlor. The main advantage is that it would enable
the legal transfer of property in a simple manner while ensuring the tax amount is reduced (Lieb,
2002). There are two types of trusts – express trust and implied trust. Express trust is formed by the
settlor by will or when he is alive. Implied trust comes into existence by courts. f
Recommended type of entity
Based on the detailed analysis of the formation of new business and the associated issues,
the suitable type of business entity for Fred’s Miracle Cough syrup is a Limited Liability
Corporation. It would minimize the financial risk by limiting the liability for Fred, and it would
offer ample flexibility to carry out the business operations. By opting for this type of business
entity, it would be possible to have limited liability while conducting the business operations.
Case study 2
Subject – Probable legal issues relating to Miracle Cough Syrup
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I am sincerely sorry to hear all the issues that you have encountered during the past few
months relating to the Miracle Cough Syrup business. I will use my knowledge and skills to help
you arrive at the most suitable solutions to address your concerns. I have incorporated a broad
range of details in the memo relating to legal defenses, civil claims, implications of bankruptcy on
business assets and assets of individual family members and intellectual property rights.
Legal Defenses
While performing the commercial loan accounting review process, it was determined that
Jane, Sam’s wife, had been siphoning off a large sum of corporate money and manipulating the
books of accounts so that her actions would not be revealed. She had also forged your signatures a
number of times while giving checks to Don, a local loan shark, so that she could clear her
gambling debts. According to the general rule, when an unauthorized individual does a signature
on a negotiable instrument, the legitimate party will not be held liable or accountable. So, in the
specific scenario, Jane would be personally held liable for her actions relating to forging the
signature unless you make the decision to ratify the signature and become liable for the specific
transactions.
The Universal Commercial Code (UCC) is responsible for governing the determination of
liabilities pertaining to customers and banks for the losses that have been incurred as a result of
fraudulent transactions. Generally, UCC places the loss on the party that it deems ideal so that the
situation can be avoided, so it is typically a business entity (Uniform commercial code. Uniform
Law Commission, 2021). However, in the situation, the check has not been authorized by the
business, and so it cannot be charged to the corporate account. Additionally, UCC also has the
‘Read your statement’ provision, which enables account holders to review their regular account
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statements to identify unauthorized charges. In case an account holder fails to identify any
fraudulent transactions within 30 days of the statement mail date, he may be liable for the
unauthorized checks. You must note that you have limited rights to recover the funds, and you
must identify and report the unauthorized signature by Jane to the bank within one year. There is a
chance that your business will be held liable for the transactions and not Jane. The bank can
determine whether the business must incur the losses for the fraudulent transactions, and it could
force Miracle Cough Syrup to accept the financial liability. The signature by Jane must be
compared with your actual signatures so that differences can be identified and Jane can be held
accountable for her actions.
Legal Defenses in relation to the church
It has been ascertained that Jane had converted a check into equivalent cash and slipped it
into the collection box at a church so that she could feel less guilty about her actions. Regarding
this matter, the same legal defense can be applied, and the onus of the actions can fall on Jane.
Even though the act of giving money to the church can be considered to be a good action but the
money that she was using did not belong to her. On the contrary, it was the money of the Miracle
Cough Syrup business that she had acquired due to forgery of signatures. The handwriting
comparison can also be done in the context of the church to ensure that the financial obligation can
be successfully transferred to Jane and not the syrup business. f
Civil Claims
In the specific situation, you have the option to bring civil charges against Jane so that it
would be possible to recoup the costs relating to the fraudulent checks. You must prove that there
were no red flags, that the business entity exercised ordinary care, and it had no role to lay in the
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entire forgery episode. By proving integrity on the part of the business, it is possible to make sure
that the liability successfully falls on Jane, who was actually responsible for the fraudulent
activities. Thus, you have the option to use civil charges to ensure that Jane will be subjected to
punishment and prosecutions for the fraudulent actions that she has committed while acting as the
bookkeeper of the Miracle Cough Syrup business. It can help the business to get reimbursement
for the fraudulent checks that have been drawn in its names.
Available forms of bankruptcy
Different forms of bankruptcy can be applied to a business in such a situation, depending
on the specific type of business. The diverse forms of bankruptcy are different for sole
proprietorships, partnerships and corporations. Since Miracle Cough Syrup is a Limited Liability
Corporation (LLC), the ideal form of bankruptcy will belong to the corporation category. The two
main forms of bankruptcy that can be considered by the LLC business include Chapter 7
(liquidation) and Chapter 11 (reorganization). Chapter 7 will lead to liquidation, and the business
will cease to exist and carry out the usual business transactions. On the other hand, Chapter 11 can
lead to restructuring. Chapter 7 option can be chosen when a business is not worth saving, whereas
Chapter 11 can be adopted if a business has the potential to survive, sustain and effectively carry
out the business operations. I believe that Miracle Cough Syrup has the potential to recover since it
has been performing exceptionally well in the market setting, and the customers have responded
positively to the offerings of the business. Thus, the business reorganization (Chapter 11)
bankruptcy is ideal for the scenario since it would enable the business to carry on with its
operational activities. This form of bankruptcy will aid in the continuation of the Miracle Cough
Syrup business in spite of facing legal complexities. f f f
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Implications of bankruptcy on the business assets
When a case is filed under the business reorganization bankruptcy category (Chapter 11) of
the United States Bankruptcy Code, the owners (or debtors) will have to be the trustees of the
company. So, this bankruptcy option will make sure that you still have possession of the business
assets and you have the duties as well as the power of the trustee. You can operate the business
even in such a difficult situation, and if the court gives the necessary approval, you can borrow
new money to carry on with the business operations of Miracle Cough Syrup (Chapter 11 -
Bankruptcy Basics. United States Courts, 2021). By filing Chapter 11 bankruptcy, you would act
as the ‘debtor in possession,’ and hence you can have access to business assets even when the
reorganization is taking place. By choosing the bankruptcy option, you will be able to pay the
creditors a section of debt that is owed to them over a period of time. The business assets may serve
as security that would help to pay off the debt of the business. One of the main advantages of the
business reorganization bankruptcy is that your personal assets would not be at risk.
Implications of bankruptcy on the assets of individual family members
The selection of the business reorganization bankruptcy can give rise to implications
relating to the assets that are owned by the individual family members of the household. While the
assets of the business would be used as security, the assets of the individual family members would
be free from any kind of risk. Thus, even if the reorganization bankruptcy may lead to the
forfeiture of certain business assets, the family assets cannot be used to meet the liability and
financial obligations of the Miracle Cough Syrup business.
Legal Resources for the infringement of intellectual property rights by Bob
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Bob has reverse engineered the recipe of the Miracle Cough Syrup and posted it online
since Sam was not willing to enter into an exclusive distribution deal. In the specific situation, you
have the option to take relevant legal recourse since Fred’s Miracle Cough Syrup had been
patented. As you have already been issued a patent for your syrup, you have the option to file a
case against Bob relating to patent infringement. You are in a position to take legal action against
him based on your intellectual property rights relating to your cough syrup. Since Bob has been
involved in using, selling or manufacturing the cough syrup without your necessary permission
and approval, you are protected by common law. After the filing of an infringement suit for the
unauthorized use of the syrup recipe by Bob, you may have to prove that he unlawfully got hold of
the recipe, which acts as your trade secret. I believe you have a good chance of recovering
damages and losses because of the vengeful actions of Bob.
I hope the diverse legal aspects that have been covered in the memo can help you in making
informed decisions relating to the Miracle Cough Syrup business. In case you have any further
queries or concerns, you can contact me by giving me a call.
Case study 3
When a company or firm is looking to launch a product or service, it is essential for them to
register with the prospectus and Securities and Exchange Commission (SEC). In general, the
prospectus is considered a formal written document, which is filed and required with the SEC and
given a lot of knowledge and information about the investment offerings for producing sales in
order to go public (Mead, 2019).
Potential legal and/or regulatory issues
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As the question has risen to mention three potential or current legal and/or regulatory issues,
this section will ensure to get an insight into the issues.
• At first, the major issue that can be seen in this case is the fraud case with the daughter-in-
law Jane. This incident has brought caution to the potential investors. Here, both Sally and
Fred require explaining the internal controls that could help in place to lower the risks in
the upcoming years. Eventually, this could help with SOX compliance as well as help
relieve any uncertainty relating to financial control.
• Apart from this, the second major issue relating to potential legal or regulatory issues is the
pending sexual discrimination lawsuit case of Tammy, which requires to be disclosed. This
is because of not offered the bookkeeper job that she applied for and hired an experienced
accountant Ted, rather than Sally and Fred. As a result, this issue can lead to a federal law
of Title VII of the Civil Rights Act of 1964 that helps to exclude the office staff from any
kind of discrimination on the basis of color, sex, religion, race, and national origin (Mead,
2019). However, it is essential to produce a valid reason like the disqualifications of the
bookkeeper position for Tammy. Thus, Fred and Sally need to find out a better way to
prove their disqualification of Tammy. After doing this task, it is essential for Tammy to
provide evidence of the cause of discrimination. As Tammy was earlier working as a
delivery driver and did not have any accounting field experience, it will be an opportunity
for Sally and Fred to strengthen their case. For instance, Ted is considered to be the best
suitable accountant with a good educational background for the position of bookkeeper. f
• At last, the major issue, in this case, is related to intellectual property rights. This can result
in major issues such as the appearance of Fred starring doctors on a popular talk show. This
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shows that it was crucial for him to display Fred's cough syrup formula online displaying of
it.
Analysis of relevant laws and using the appropriate given facts and legal test
In this case, Sally and Fred should first file the registration statement with the SEC and an
S-1 to follow the government regulations. This could help them to require disclosing all financial
information, a detailed description of company-owned properties, and different ongoing and prior
legal matters (Mead, 2019). After completion of this process, it will be easy for them to follow the
regulations. However, the hiring of experienced accountant Ted is showing its investors how the
company tries to resolve their previous issues along with their financial problems.
Conclusions and recommendations
At this time, I would like to recommend that the company should not go for the public as
they are involved with different lawsuits, which can affect them the most. However, they can plan
to go public by going through the venture capital course in the upcoming years. Also, they can
become a public company by converting to a corporation. For them, it is a great opportunity to go
through the educational process to begin preparation for them and achieve their goal with the
support of law and policies.
References
Cohen, H., & American Law Division. (2003, February). Products Liability: A Legal Overview.
Congressional Research Service, Library of Congress.
Chapter 11 - Bankruptcy Basics. United States Courts. (2021). Retrieved April 1, 2022, from
https://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-11-
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bankruptcy-
basics#:~:text=A%20case%20filed%20under%20chapter,court%20approval%2C%20borro
w%20new%20money.
Fair Packaging and labelling act: Regulations under section 4 of the fair packaging and labelling
act. Federal Trade Commission. (2020, March 4). Retrieved March 15, 2022, from
https://www.ftc.gov/enforcement/rules/rulemaking-regulatory-reform-proceedings/fair-
packaging-labeling-act-regulations-0
Libretexts. (2021, September 14). 15.2: The agency relationship. Business LibreTexts. Retrieved
March 15, 2022, from
https://biz.libretexts.org/Bookshelves/Law/Fundamentals_of_Business_Law_(Randall_et_
al.)/15%3A_Agency/15.02%3A_The_Agency_Relationship
Lieb, C. (2002). The IRS Wages War on the Family Limited Partnership: How to Establish a
Family Limited Partnership That Will Withstand Attack. UMKC L. Rev., 71, 887.
Mead, A. (2019). Legal and regulatory issues governing cannabis and cannabis-derived products
in the United States. Frontiers in plant science, 10, 697.
Probate code. Probate Code - Uniform Law Commission. (2020). Retrieved March 15, 2022, from
https://www.uniformlaws.org/committees/community-home?CommunityKey=a539920d-
c477-44b8-84fe-b0d7b1a4cca8
Tulsian, P. C. (2002). Business organization and management. Pearson Education India.
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Uniform commercial code. Uniform Law Commission. (2021). Retrieved April 1, 2022, from
https://www.uniformlaws.org/acts/ucc
