Final Paper: You Are The Manager Of Acme Fireworks

Final Paperyou Are The Manager Of Acme Fireworks A Fireworks Retailer

Final Paperyou Are the manager of Acme Fireworks, a fireworks retailer who sells fireworks, puts on ground display fireworks, and large aerial display fireworks. The company started in the owner’s garage two years ago and now has 15 employees that you manage. The company started as a sole proprietorship, and the owner has never changed the entity. The owner has informed you that the company has received inquiries from several large businesses wondering if the company could create several fireworks displays on a regular basis. The owner told the inquirers that the company could fill such display orders, and a price per display was agreed upon.

It was discussed that most of the cost for a fireworks display is for skilled labor, insurance, and the actual service of setting off the fireworks. No other details were discussed. The owner is anticipating that new employees will need to be hired, but he is worried that if the large orders for fireworks displays do not continue, the company will not have the funds to pay the new employees. The owner is now considering changing the business entity, but he does not know what entity to form or how to form it. The owner has asked you to do the following: Determine if the contracts with the businesses will be governed by common law or the Uniform Commercial Code (UCC), and explain why. Analyze whether the owner formed a contract with the businesses, and apply the five essential elements of an enforceable contract. Explain the potential personal liability to Acme Fireworks if a spectator is injured by a stray firework from a fireworks display. Discuss the different employment types and relationships relevant to agency law, and analyze the advantages and disadvantages of each type specific to Acme Fireworks. Explain why Acme Fireworks should not operate as a sole proprietorship. Recommend a new business entity, and provide rationale to support your recommendation. For each task, be sure to analyze the relevant law, apply the facts to the law, and make a conclusion. The paper Must be 8 to 10 double-spaced pages in length (not including title and references pages) and formatted according to APA style as outlined in the Ashford Writing Center. Must include a separate title page with the following: Title of paper Student’s name Course name and number Instructor’s name Date submitted Must begin with an introductory paragraph that has a succinct thesis statement. Must address the topic of the paper with critical thought. That is, describe what your response is to the content, either positive or negative, and defend your position. If multiple options, alternatives, and/or positions are present and are being rejected, you must also defend the reasons for rejecting an option. Must end with a conclusion that reaffirms your thesis. Must include at least five scholarly sources, two of which must be from the Ashford University Library, in addition to the course text. Must document all sources in APA style as outlined in the Ashford Writing Center. Must include a separate references page that is formatted according to APA style as outlined in the Ashford Writing Center.

Paper For Above instruction

Introduction

The rapidly expanding fireworks industry presents unique legal and business challenges that require careful analysis and strategic planning. As the manager of Acme Fireworks, a growing company initially operated as a sole proprietorship, it is essential to understand the legal frameworks governing contracts, liability, employment relationships, and the most suitable business structure for future growth. This paper critically examines whether the contracts with potential clients fall under common law or the Uniform Commercial Code (UCC), evaluates the formation and enforceability of these contracts, assesses personal liability risks, explores employment law considerations, and offers a comprehensive recommendation for restructuring the business entity to facilitate sustainable expansion.

Legal Framework Governing Contracts: Common Law vs. UCC

The determination of whether contracts with large business clients fall under common law or the UCC hinges on the nature of the goods or services involved. The UCC primarily governs transactions involving the sale of goods—tangible, movable items—codified under Article 2. Conversely, contracts for services are typically regulated by common law. Since Acme Fireworks offers both product sales and fireworks display services, the legal classification depends on specific contract terms.

In the scenario where Acme is creating customized fireworks displays—a service—the contractual relationship would generally fall under common law, which governs service contracts. The essence of these agreements involves personal labor, specialized skills, and performance obligations, aligning with the principles of common law contractual interpretation. However, if the contracts involve the sale of fireworks as tangible goods, then the UCC's provisions could govern the sales aspect, especially if the agreement explicitly states so. Given the integrated nature of fireworks display services and the sale of related materials, it is likely that both legal regimes could apply, but the primary governing law for service components remains common law.

Contract Formation and the Five Essential Elements

To determine whether an enforceable contract exists between Acme Fireworks and large business clients, all five elements—offer, acceptance, consideration, legality, and contractual capacity—must be satisfied.

Offer: The owner’s statement that the company can fulfill display orders at a predetermined price constitutes an offer, especially if directed towards the business inquiries.

Acceptance: The businesses' agreement to the price per display indicates acceptance, creating a mutual understanding.

Consideration: The agreed-upon price per display and the services or goods exchanged constitute valid consideration, forming the basis of the contract.

Legality: The fireworks displays are lawful activities, assuming compliance with safety regulations and permits, rendering the contract legal.

Capacity: The companies involved and Acme Fireworks' owner possess the capacity to contract, assuming all parties are of legal age and sound mind.

Given these conditions, the contracts likely fulfill the essential elements and are enforceable, provided that all formalities and disclosures are appropriately handled.

Potential Personal Liability for Injuries

Personal liability risks for Acme Fireworks emerge if a spectator sustains injuries owing to stray fireworks or negligent handling. Under product liability laws, the company could be held liable if fireworks are defective or if safety standards are not met. Additionally, tort law imposes strict liability on parties engaged in ultrahazardous activities like pyrotechnics, under which fireworks displays are classified. If negligence or recklessness is proven—such as improper setup or failure to adhere to safety protocols—Acme Fireworks could face substantial damages and legal penalties.

Moreover, the risk extends to personnel, and if an employee’s actions lead to injury, the company may be vicariously liable under agency law. Liability exposure underscores the importance of comprehensive insurance coverage, adherence to safety regulations, and employee training to mitigate potential lawsuits and financial losses.

Employment Relationships and Agency Law

Understanding employment classifications and agency relationships is vital for Acme Fireworks' operational strategy. The primary employment types include employees, independent contractors, and temporary workers.

Employees: Employees are hired under an employment contract, subject to control regarding work hours, procedures, and supervision. Advantages include greater control over work quality; disadvantages encompass higher costs, payroll taxes, and legal obligations under employment laws.

Independent Contractors: Contractors offer services independently, controlling their methods and hours. Benefits include reduced legal obligations and lower costs; drawbacks encompass less control over outcomes and potential classification disputes under law.

Agency Law: An agent acts on behalf of the principal (the company) within the scope of agency, creating liability for the principal if the agent acts within authority. For Acme Fireworks, employing skilled display operators as employees offers control and liability management, whereas contracting with independent display artists provides flexibility but less oversight and increased risk of misclassification.

Choosing the optimal employment structure involves balancing control, legal obligations, costs, and risk management. Employing a combination, with core employees managing safety and compliance while outsourcing specialized displays, could optimize operations.

Operating as a Sole Proprietorship: Risks and Limitations

Operating as a sole proprietorship presents significant drawbacks for Acme Fireworks. The primary concern is unlimited personal liability, where the owner’s personal assets are at risk in the event of lawsuits, debts, or liabilities arising from accidents or contractual breaches. Furthermore, sole proprietorships face challenges in raising capital, expanding operations, and establishing credibility with large clients due to perceived instability and limited business continuity.

The lack of legal separation between owner and business limits the company’s capacity to grow and undertake large contracts confidently. The owner's personal assets, including homes and savings, are vulnerable to claims resulting from fireworks-related accidents or contractual disputes, thus exposing personal wealth and jeopardizing the company's future.

Recommended Business Entity: Limited Liability Company (LLC)

Given the operational risks, potential liabilities, and growth aspirations, forming an LLC emerges as the most suitable business structure. An LLC offers liability protection akin to corporations, which shields owners’ personal assets from business liabilities. It also provides operational flexibility and pass-through taxation, avoiding double taxation inherent in corporations.

Establishing an LLC involves filing articles of organization with the state, drafting an operating agreement, and obtaining necessary permits. This structure aligns with Acme Fireworks’ needs to facilitate large contracts, expand its workforce, and mitigate personal liability, all while maintaining managerial flexibility.

The LLC structure supports the company's future growth, allows for easier partner or investor involvement, and enhances credibility with large corporate clients, thereby making it an optimal choice over sole proprietorships or corporations.

Conclusion

In conclusion, Acme Fireworks stands at a pivotal juncture requiring careful legal and strategic decisions. The contracts with potential clients for fireworks displays are primarily governed by common law, given the service-oriented nature of the agreements, though aspects of the UCC may apply to the sale of fireworks. These contracts are enforceable provided that all legal elements are met. The company faces tangible personal liability risks from injuries and accidents, emphasizing the importance of safety and insurance. Regarding employment relationships, a hybrid approach leveraging both employees and independent contractors can balance control with flexibility. Operating as a sole proprietorship exposes the owner to unlimited liability, hindering growth and protection. Transitioning to an LLC offers liability protection, operational flexibility, and growth capacity, positioning Acme Fireworks for sustainable success in a competitive industry. Strategic legal structuring, combined with sound operational practices, will ensure the company’s resilience and capacity to capitalize on new opportunities.

References

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