Ernie R.

Batayola
ABM 11 - A

Case Study 1

Craig wants to sell a small commercial cleaning business that he owns. He isn’t sure

what the sale price for the business should be. He owns about 100, 000 pesos worth of business

equipment and has several cleaning contracts with large businesses. What are some of the factors

he should consider in determining a fair sales price?

-To determine fair sales price, there will be factors that should be considered such as the cost price,

operating cost of the equipments and profit he wanted. Find the sum of cost price of every equipment,

the approximate operating cost of each, and the profit with consideration of clients' status.

Case Study 2

Joan, a fifth grader teacher at Larson Elementary School, noticed that many people

regularly brought fast food to the local park next to her school during the noon hour. Joan

decided that she would take advantage of the ready-made clientele and open a hot dog stand in

the park during the summer. She obtained the necessary permits for the stand from the country;

she did not make any filings with the secretary of state. On the first day of summer break, she

opened her stand, which she called Hot Doggity. She had a booming business and was thrilled

with the income.

Soon another local hot dog house, Hot Doggedy, started noticing a significant decline in

its lunch- hour business. Hot Doggedy was very surprised at the decline, since it was always a

favorite stop for customers who would eat their lunch in the park that is only half a block away.

Hot Doggedy’s owner noticed the park was still full at lunchtime and people were eating hot
dogs in wrappers that looked just like his, only bearing the name Hot Doggity. As soon as Hot

Doggedy’s owner learned about Joan’s hot dog stand, he contacted the secretary of state to

complain about the name of Joan’s hot dog stand. How would the secretary of state decide this

matter? What are the relevant issues that it will consider? Explain your answer.

-Same businesses name may confuse the customers, vendors and the public. In order to avoid

such case, business should register its name with the state. In situation of Joan, she didn't fill any

involved documents of her business with the secretary of state. Hence, Joan's business name was

not registered. And since the owner of the Hot Doggedy was already affected because of decline

of the market, he can sue Joan. He can consult an attorney who specializes in trademark law, to

fix this issue.

Case Study 3

Dave and Cindy recently graduated from the U of M School of Law. They want to start a

general practice law firm together. They were best friends in law school and are confident in

each other’s ability to practice law. They both have about $ 1,000.00 to invest in the business,

and neither has any significant personal assets (neither owns a home, and both have junker cars

from their law school days).

They aren’t sure how to form their business association, and they visit the attorney that

you work for to learn about their options. Your attorney tells you that she will recommend that

they form a limited partnership or a professional corporation. What form would you recommend
and why? In answering this question, discuss the liability issues and tax ramifications of your

choice.

-I would suggest the Professional Corporation. It is a corporation of professionals that is

organized under the laws of a specific state. The shareholders and officers in a corporation are

free from personal liability. Professional Corporation does not allow professionals to be free

from professional actions. The main disadvantage is that income is taxed at the corporate tax rate

of 21%.because the employees pay tax on their income as employees.

Case Study 4

Kent and Craig are brothers who want to start a horse- training business. They both have

considerable experience working with horses, and both want to be involved in the business,

including daily training of horses. They have spoken to an insurance agent about getting

insurance to cover the potential liabilities, but they were told that they can’t get any insurance

to cover this type of high- risk business (because of the potential for personal injury).

They come to your firm seeking advice about forming their business; they are particularly

concerned about their potential liabilities, especially to any other trainers that they might hire.

What business form(s) would you recommend to your supervising attorney for this business?

Why? What are the advantages and disadvantages of this business form? Explain what

protections this business form would offer them from potential liabilities.

-I would recommend Limited Liability Company (LLC). It has advantage of both corporation

and partnership business structures. It protects you from your personal liability most of the times.
Profits and losses can get pass through to your personal incomes without facing corporate taxes.

The only disadvantage is that members of this kind of business structure are considered self-

employed and they must pay self- employment tax contributions. I would also like to recommend

S Corporation. This type of corporation is called S for self- employed. In here, the liability is

limited to the assets of the corporation which means that your personal assets are safe.The profits

and losses from this business “flow through” to the shareholder’s personal tax returns. It

means S corporations can avoid double taxation on the corporate income.

Case Study 5

Gerard is an incredible candy maker and would like to go into business for himself, but

he needs some money to get started. His parents want to help him get his feet on the ground and

start his career. They agree to invest in his business, however, they don’t want to be involved in

any part of the business, they are just trying to help him out. Gerard asks your supervising

attorney for advice on how to organize his business. The task is assigned to you. What business

form would suit the needs of Gerard? Why? What are the advantages of this business form?

-The business form that would suit Gererd’s case is limited partnership. In limited partnership,

at least one partner is considered as general partner while the other one is limited partner. This

means the general partner which is Gerard has the full authority when it comes to operations and

is personally liable for business debts. Since his parents only invest to his business and does not

want to meddle with it, they will be the limited partners.