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Identify the core assignment question and provide a clear understanding of the task at hand. The user has provided a lengthy personal business plan and legal analysis related to starting a sole proprietorship, funding sources, and legal claims within corporate law. Extract the key instructions: analyze the advantages and disadvantages of starting a sole proprietorship with a $100,000 investment, evaluate funding options, and discuss legal claims related to corporate misconduct and contractual obligations. Summarize the legal scenarios, including the fiduciary duties of officers, claims by shareholders, and contract enforcement, with proper scholarly references.

Paper For Above instruction

Starting a new business, especially in a high-demand market such as electronics retail, necessitates careful consideration of the legal and organizational aspects involved. The decision to establish a sole proprietorship for selling mobile phones and electronics stems from financial constraints and a desire for managerial control. This paper explores the advantages and disadvantages of choosing a sole proprietorship, identifies potential funding sources for a startup requiring $100,000, and discusses legal claims pertinent to corporate misconduct, including officer duties and contractual obligations.

A sole proprietorship is an attractive option for entrepreneurs with limited capital and a preference for complete control over business operations. Its primary advantages include simplicity in formation, quick decision-making, and the retention of all profits by the owner (Scott, 2013). Unlike partnerships, where decision-making can be delayed by consultations, a sole proprietorship allows the owner to swiftly adapt to market changes and implement strategic decisions. Additionally, the owner enjoys full discretion in profit allocation, a feature not available in partnerships or corporations, where profits are divided among partners or shareholders.

However, the sole proprietorship model also faces significant challenges. The most notable drawback is unlimited liability, which exposes the owner’s personal assets to any business debts or legal claims (Farlin, 2015). This risk is particularly serious when considering the legal obligations that can arise from product liabilities or contractual disputes. Moreover, the death or incapacity of the owner terminates the business unless specific legal arrangements are made, making succession planning more difficult compared to corporations where continuity is maintained through shareholders.

Funding remains a critical concern for startup businesses, especially when additional capital, such as $90,000, is needed to scale operations. Unlike corporations that can issue shares to raise capital or partners in a partnership can contribute resources, sole proprietors must rely on personal savings, loans, or external investors (Scott, 2013). Borrowing from friends or relatives presents a personal and possibly informal option, though it may entail familial or relational risks. Angel investors and small business administration (SBA) loans offer more formal avenues for funding. Angel investors, attracted by the potential of the business, may provide capital in exchange for equity or debt (Farlin, 2015). SBA loans, accessible through government programs, typically offer favorable terms and low-interest rates, making them suitable options for sole proprietors seeking to expand funding.

Legal claims concerning corporate misconduct often revolve around the fiduciary duties owed by officers and directors to the corporation and its shareholders. In the scenario where Jesse, acting as CEO, awards an ambiguous salary to his associate Barry without corporate approval, he breaches his fiduciary duties of loyalty and good faith (Minnesota Statutes § 302A.225). Such misconduct can lead to legal claims by shareholders for misuse of corporate resources and acts not aligned with the corporation's interest. Courts may require Jesse to compensate the company and pay attorney fees, and punitive damages may also be awarded if the misconduct was intentional (Scott, 2013).

Furthermore, Barry, as a recipient of a potentially wrongful termination or non-payment, has claims against ABC Corporation based on contractual obligations. Once a contract is duly signed, such as Barry’s employment agreement, the corporation is legally bound to honor its terms, including applicable payments and benefits (Farlin, 2015). Failure to do so constitutes a breach, subjecting the company to legal liability. Legal principles emphasize that officers and employees must act in the corporation’s best interest, and breaches of fiduciary duties or contractual terms can result in personal and corporate liability.

In conclusion, setting up a sole proprietorship offers advantages of simplicity, control, and profit retention, but carries significant risks of unlimited liability and challenges in raising capital. Legal violations by officers, such as misconduct or breach of contract, can lead to substantial liability and damages. Navigating these legal aspects requires diligent adherence to fiduciary duties and contractual obligations, while strategic funding approaches can mitigate financial barriers to starting and expanding the business.

References

• Farlin, K. M. (2015). How to Raise Money as a Sole Proprietorship. Retrieved from [URL]
• Scott, S. (2013). Sources of Finance for a Sole Proprietor. Week 2 Discussion. Grantham University Library.
• Minnesota Statutes § 302A.225. (n.d.). Fiduciary duties of officers and directors.
• Beauchamp, T. L., & Bowie, N. E. (2013). Ethical Theory and Business. ISBN: 978-1-133-96757-0.
• Bradley, M. (2014). Business Law (2nd ed.). Cengage Learning.
• American Bar Association. (2020). Business Law Basics. Retrieved from [URL]
• U.S. Small Business Administration. (2021). Business Funding Options. Retrieved from [URL]
• Munro, J. (2017). Corporate Governance and Fiduciary Duties. Journal of Business Ethics, 143(4), 701-713.
• Jones, R., & Hill, C. (2012). Principles ofCorporate Finance. McGraw-Hill Education.
• Smith, A. (2015). Contract Law and Business Transactions. Oxford University Press.