Types of business entity

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The potential for personal liability for injuries to consumers by the fireworks hat is manufactured at Acme Fireworks could be considered a real threat to the company. Hiring more employees is necessary, therefore there is a chance that the company is taking that the quality of the product may be reduced. If a consumer is injured by a product that is manufactured by Acme Fireworks the company will be liable. It states in the article Product liability and Tort Reform that “courts have begun to establish new grounds for bring lawsuits.

Where before a plaintiff had to show physical injury, now courts will recognize damages for “fear of injury” arising from past exposure to harm. (Wallace, 1988) (Para 24) If a consumer is injured all that they need is to show is that they were injured because the product was defective. Not because they mishandled the product. It states in the article that ‘the manufacturer is liable if the plaintiff only simply shows a defeat in the product caused the injury’ (Wallace, 1988) (Para 12) It is described as the theory of Strict Liability.

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If the plaintiff is mishandling the products and is injured because of their own negligence that court will still rule in favor of the plaintiff and make the manufacturer responsible and find in for the plaintiff. It states in the article by that “courts have in many cases created definitions for the word “defective” that guarantee the manufacturers liability. ” (Wallace, 1988) (Para 15) Punitive damages is another risk that the company takes. Sometimes the courts will award high dollar amounts for punitive damages also pain and suffering.

It states in the article that “this system may grant one person a lot of money and a different person with the same injuries a lot less money, it is like playing the lottery. ” (Wallace, 1988) (Para 32) There are steps that a company can take to help reduce the risk of law suits. This is the Legal Defense Initiative (LID). The article states that “LID has three steps the teach companies how to reduce their risk for product liability law suits. ” (Wallace, 1988) (Para 36) The owner of Acme Fireworks Company did enter into contracts with the retailer.

First the companies made an offer to order large quantities of fireworks from Acme Fireworks. It states in our text Essentials of Business Law that first an “Offer: An invitation for another to enter into a contract. ” (Unit 11, Para 7) Second Acme Fireworks accepted by giving the purchase price for the fireworks. It states in our text that “Acceptance: Acquiescence to enter into a contract under the terms of the offer. ” (Unit 11, Para 7) Third the owner told the retailers that the company could fill such orders, and a price per unit was agreed upon.

It states in our text that “Consideration: Anything of legal value that is asked for and received as the price are special rules for people who are under legal age. ” (Unit 11, Para 7) Fourth the owner did acknowledge the offer and it was legal. It states in our text that “Legality: The extent to the contract is legal and not against public policy. (Unit 11, Para 7) Fifth the owner the owner is of legal age to enter into a contract and is of sound mind at the time he enter into the contracts.

It states in our text that “Capacity: The mental competency to enter into a contract. Additionally there are special rule for people who are under legal age” (Unit 11, Para 7) Because of the amount of contracts and the quantities that are needed to fulfill these contracts the owner of Acme Fireworks will need to hire more employees. The question of what kind of employees should he hire would be should he hire temporary employees or permanent employees. Temporary employees would be a better choice.

It states in the article The Impacts of Job Characteristics on Employee Satisfaction: A Comparison between permanent and temporary employees that horsepower employees (Test) are procured to fill a contingent need and to work for a specified, but limited, amount of time. (Branches, S. D. , Klein, G. , (2008) If the contracts continued Acme Fireworks could hire the temporary employees permanently. It states in the article that mere is more demand for automation, and companies expect temps to be immediately proficient and able to perform the work.

They don’t want to spend time training someone. ” (Marsha, C. (1989)) If Acme Fireworks could hire experienced temporary employees that would save them the cost of training a new person. Also, for the temporary employee if they are not experienced the job would give them experience and that may help them to find permanent employment. It state in the article that ‘Temporary employees have unique work skills and maybe able to handled peak workloads. (Marsha, C. (1989)) One reason that the hiring the temporary employees would be to help keep the permanent employees content.

It states in the article that “Follow up interviews valued satisfaction of the permanent employees negatively impacted by perceived work load imbalances. ” (Maroon, C, (1989)) (Para 1) Another reason that the Acme Fireworks Company should choose to hire temporary employees is because, if the contracts fall through the company can end the assignment of the temporary employees and still be able to continue to produce the products that they did before the new contracts happened. An LLC partnership would be a good structure change for this company.

The owner of Acme Fireworks would be able to find investors to help cover the cost f the overhead needed to fill bigger contracts as they arise without losing and control. The overhead cost could include the cost of materials needed to produce more supplies of the products. The cost of hiring more employees whether they are temporary or permanent employees. The increased cost of insurance whether it is for the employees or for the manufacturing insurance, such as, disability or health insurance. There is also the cost of needing a bigger building to handle the larger quantities for employees and materials needed to fill the larger orders.

The cost f larger utility bills, such as, electric and water is something that should be considered when taking on bigger contracts. Another benefit of reforming the company to an LLC would be that the owner of Acme Fireworks would not lose control of the company he would still be in charge and only share the profits and losses with the investors. The owner of Acme Fireworks would be the general partner and would retain unlimited liability of the company. For example, if Acme Fireworks were sued only the owner as the manufacture would be sued not the investors. It states in our text that the rules for and LLC partnership are as written.

First “The partnership must contain at least one general partner with unlimited liability. ” (Chap 13. 1, Para 38) Second “The partnership must be entered into pursuant to a written agreement as specified by statute. ” (Chap 13. 1, Para 38) Third “The limited partnership agreement must be filed with the appropriate state agency (usually the secretary of state). ” (Chap 13. 1, Para 38) Fourth “Limited partners cannot be involved in the running of the business, but must merely be investors who share in its profits and losses to the extent of their investment. ” (Chap 13. 1, Para 38)

The owner could use the help of investors and still have all the say in the running of the company. In conclusion Acme Fireworks Company could benefit from changing the company to include LLC instead off sole proprietor. It would also benefit Acme Fireworks by using temporary employees to fill these contracts. They would also have the flexibility to keep the temporary employees if the contracts continued.

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Types of business entity. (2018, May 26). Retrieved from


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