Case Study Three: Arcadia Sports In the case of Jeb and Josh in the formation of Arcadia Sports, there are issues concerning the business entity and liability to Jane, who suffered an accident during an excursion with Arcadia Sports. It is unclear what type of business has been formed between Jeb and Josh and what liability each may have for the accident and what personal assets would be involved considering Jeb’s bankruptcy. Therefore, the main types of business entities, including advantages and disadvantages, will be discussed before providing a recommended business entity for Jeb and Josh. Further, an assessment will be made of the type of business that would result in personal liability for Jeb and Josh for Jane’s accident, and how each
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An evaluation will be made to demonstrate how Jeb’s personal creditors would be able to collect on his debts and to seize the assets and/or profits from Arcadia Sports based on whether each business is a sole proprietorship, partnership, a corporation, and a limited liability company. First, under a sole proprietorship, Jeb’s creditors would be able to seize all of his personal assets, his home and all of the profits from Arcadia Sports. The reason for this is that a sole proprietorship is not a separate legal entity, and the sole proprietor is personally liable for all debts and actions (Kubasek, 2012). In this situation, Arcadia Sports would be considered an asset of Jeb’s for the sake of those seeking payment on his …show more content…
Specifically, if Jeb’s wind farm business and Arcadia Sports were created as either limited or limited liability partnerships, there would be a change in how the debt would be handled. Particularly, with regards to Arcadia Sports, those seeking debt repayment for Jeb, would be entitled only to Jeb’s investment in the business, Josh’s assets could not be touched (Kubasek, 2012). If, however, the partnership was formed as a general partnership, both Jeb and Josh would share unlimited liability for each other’s obligations (Kubasek, 2012). As such, Arcadia Sports would be considered an asset towards the repayment of Jeb’s debts. Third, if the wind farm and Arcadia Sports were formed as corporations, the debtors would have limited recourse with regards to assets tied into Arcadia Sports. Specifically, they would be able to go after the assets that Jeb had invested in stocks, but not the company itself because they are separate legal entities. However, in this situation, the debt collectors would then be the owners of stock in Arcadia Sports, and if Jeb owned 51% or more of the stock, the creditors could then liquidate the corporation and all assets sold to pay Jeb’s
An evaluation will be made to demonstrate how Jeb’s personal creditors would be able to collect on his debts and to seize the assets and/or profits from Arcadia Sports based on whether each business is a sole proprietorship, partnership, a corporation, and a limited liability company. First, under a sole proprietorship, Jeb’s creditors would be able to seize all of his personal assets, his home and all of the profits from Arcadia Sports. The reason for this is that a sole proprietorship is not a separate legal entity, and the sole proprietor is personally liable for all debts and actions (Kubasek, 2012). In this situation, Arcadia Sports would be considered an asset of Jeb’s for the sake of those seeking payment on his …show more content…
Specifically, if Jeb’s wind farm business and Arcadia Sports were created as either limited or limited liability partnerships, there would be a change in how the debt would be handled. Particularly, with regards to Arcadia Sports, those seeking debt repayment for Jeb, would be entitled only to Jeb’s investment in the business, Josh’s assets could not be touched (Kubasek, 2012). If, however, the partnership was formed as a general partnership, both Jeb and Josh would share unlimited liability for each other’s obligations (Kubasek, 2012). As such, Arcadia Sports would be considered an asset towards the repayment of Jeb’s debts. Third, if the wind farm and Arcadia Sports were formed as corporations, the debtors would have limited recourse with regards to assets tied into Arcadia Sports. Specifically, they would be able to go after the assets that Jeb had invested in stocks, but not the company itself because they are separate legal entities. However, in this situation, the debt collectors would then be the owners of stock in Arcadia Sports, and if Jeb owned 51% or more of the stock, the creditors could then liquidate the corporation and all assets sold to pay Jeb’s