Hi, I need replies for 2 Business Law discussion posts. Each reply needs to be at least 100 words, have 1 scholarly source, and be in APA format.
To give you some context, this is the case study:Peter and Andrew are brothers. Since childhood, they have wanted to convert a barn on their grandfather’s farm into a hunting and fishing lodge that would provide modest but comfortable accommodations for sportspersons using nearby recreational lands. Andrew has suggested that they bring his friend, Paul, into the business, as well. While Peter and Andrew would develop the property, Paul has experience in the hospitality industry and could manage the day-to-day operations. Peter and Andrew would also want to make the lodge available to local church groups for worship retreats. They haven’t yet discussed this with Paul, because they know he is not comfortable with most churches and their positions on social issues. The men are now discussing how to form the new business, and have narrowed their choices to a general partnership or a limited liability company (LLC). What would you advise, and why? Consider and discuss issues such as:
What personal liability will the owners have for the obligations of the business (contracts, debts, lawsuit judgments, etc.)
Should Paul be included as a co-owner, or in some other role? On what do you base that decision?
How would contributions to the new business of skills, experience, labor, etc. be valued when determining percentages of ownership?
How would profits and losses be distributed
This is the first discussion post:Peter and Andrew are two brothers who want to start a business by opening a hunting and fishing lodge. They are considering bringing a friend, Paul, in to handle day-to-day operations but Paul has issues with churches which the brothers want to make the lodge accessible to churches. I think the brothers should discuss this with Paul. I do not think Paul should be brought in as a co-owner because he may decide at any time, he no longer wants to accommodate the churches and may even sabotage the business. A general partnership may be the better choice for the two brothers. A general partnership is a business arrangement by which two or more individuals agree to share in all assets, profits, and financial and legal liabilities of a jointly owned business (Investopedia, 2020). The brothers should hire Paul as an employee and pay him according to his skills, experience, and performance. Including Paul as a partner would not be wise because Paul may have issues with what the brothers want to offer to churches. Although, the brothers have not yet talked to Paul about the startup of the new business so we do not know what Paul’s actual respond would be. The contributions should be valued equally between the brothers and as I said before Paul should be compensated according to his work abilities. In the article “Choice of Organization Form for the Start- Up Business” Matheson says, “to avoid unanticipated outcomes in the operation of the partnership, parties should approve a written partnership agreement before forming a partnership (p. 9).” This would prevent uneven distributions of responsibilities as well as liabilities. Profits and losses would be distributed equally between the brothers as well. 2 Corinthians 6:14 states, “Do not be unequally yoked with unbelievers. For what partnership has righteousness with lawlessness? Or what fellowship has light without darkness? (ESV (English Standard Version)” In conclusion, my suggestion to Peter and Andrew would be to start a general partnership with each other and let Paul be an employee.
This is the second discussion post:
In the case of Peter, Andrew, and Paul, I would suggest taking their business in the direction of an LLC. An LLC will offer more role clarity than a general partnership with more formal, binding, contractual obligations. Working with family that has a vision for a specific idea is important to guard upfront. Bringing in Paul may complicate the dynamic, and my legal advice would be to not bring him into the deal at all if the brothers are unsure if he shares similar values with them. “Do not be unequally yoked together with unbelievers. For what fellowship has righteousness with lawlessness? And what communion has light with darkness?” (2 Corinthians 6:14) It is crucial that people who start a business together share a vision and share values that hold them accountable while binding the business together. The morals of the founders should be the backbone of the business. If Paul is to be brought in, I would suggest making him a non-managing member within a manager-managed LLC. “In a manager-managed LLC, non-managing members generally do not have authority to act on behalf of the business venture.” (Melvin, 2021) Day-to-day operations can still be influenced by Paul, but the final say should be made by Peter and Andrew since they have the vision for their business. Peter and Andrew must make Paul’s influence big enough to be able to share useful knowledge and maintain operations but keeping the entirety of the operation small enough to warrant a smaller percentage of ownership. Each of these arrangements and stipulations should be written, agreed upon, and signed before entering official business. Roles, responsibilities, profit, and loss distribution should be shared proportionally to the amount of stake that is put in initially. If Peter and Andrew come with the vision, finances, and property, they should be carrying most of the burden and in turn, most of the profit. The operating agreement should be the detailed in all matters that pertain to the business and its owners. As these men move forward into this process, I suggest continuing only with the two brothers.