Acme Fireworks’ Legal Review and LLC Strategy for Liability Protection and Business Expansion Essay

Introduction

Acme Fireworks, a retailer and producer of fireworks displays, has expanded rapidly in the last two years, employing 15 people. The owner is considering restructuring the business due to recent interest from major corporations in scheduling regular fireworks displays. This essay examines the relevant legal issues, including contracts, personal liability, employment classifications, and the proposed business structure.

Based on the findings of this investigation, Acme Fireworks will receive recommendations on how to proceed legally in accordance with agency regulations. The essay suggests that changing the business entity from a sole proprietorship to a corporation is critical to protecting the firm’s interests and ensuring its continued success. Acme Fireworks should consider converting to a limited liability company (LLC) to protect the owners from lawsuits, protect the firm’s assets, and ensure its continued existence.

Uniform Commercial Code (UCC) and Common Law

When deciding whether a business contract is subject to common law or the Uniform Commercial Code (UCC), consider the nature of the transaction. The UCC regulates contracts related to the sale of goods, whereas common law applies to agreements concerning real estate, insurance, services, employment, and other intangible assets (Burtler, 2022; Finnegan, 2020). The fireworks display is the subject of this contract. Although the UCC applies to the retail sale of fireworks, it does not cover the human effort and ongoing services required to put on a fireworks display. It means that common law is most likely to apply to the contract. It is because common law typically governs contracts involving ongoing performance, the scope of which shifts as the amount of work performed or the size of the display changes.

There are similarities between common law and the UCC’s approach to contracts, as well as significant differences. The Uniform Commercial Code (UCC) establishes more consistent regulations for contracts for the sale of goods than the common law does (Finnegan, 2020). Since the fireworks display is a continuing service, the specifics of the contract would be more important than general guidelines. As a result, the UCC oversees most contracts involving the sale of goods, while common law primarily governs contracts for the provision of continuous services. Since putting on a fireworks show necessitates human labor, the disputed contract is most likely governed by common law.

Analysis of the Contract Between ACME and Other Businesses

Examining the required elements of a valid contract will reveal whether ACME Fireworks and the other parties involved had a binding agreement. Under common law, a contract requires an offer, acceptance, awareness, consideration, and mutual consent (Hoory et al., 2022). A regular fireworks show at a set price per event was among the terms to which Acme Fireworks agreed. Businesses would pay for the fireworks displays that Acme Fireworks would put on.

The length of the contract, the number of screens, and the financial terms were all points of contention. According to Butler (2022), a formal contract formalizes the rights and obligations of the parties to a transaction. However, these transactions fall under Article 2 of the Uniform Commercial Code, specifically the Sales of Merchandise (Uniform Commercial Code, n.d.). The fireworks are products within the meaning of this law, and their sale necessitates the creation of a binding contract. Under the UCC law, contracting parties can agree to table specific deal terms for later discussion and revision.

In this case, the businesses accepted ACME Fireworks’ offer of service. The parties agreed on a reasonable fee for the services as part of the deal. This means that ACME Fireworks and the other parties involved came to a legally binding agreement. However, for a contract to be legally binding, both parties must be of legal age, have the legal capacity to enter into a contract, and understand what they agree to (Butler, 2022). ACME Fireworks should understand the legal components of a binding contract to protect its interests and ensure that the other party strictly adheres to the agreed-upon terms.

In conclusion, the evidence suggests that ACME Fireworks and the other companies involved had a binding agreement. However, for the agreement to be legally binding, the parties must be of legal contracting age, have the necessary knowledge and understanding of the terms and conditions, and intend to be legally bound by it. ACME Fireworks should understand the legal requirements for a binding contract to protect its interests and ensure compliance with the agreed-upon terms.

Elements of a Binding Contract

Offer

Acme Fireworks must provide these specifications in all agreements with the companies. The offer constitutes the initial component, providing the basis for the agreements. The offer must detail the “WHY” of the agreement, outlining the responsibilities and commitments of each party.

Therefore, ACME’s Offer to the companies is to supply pyrotechnics, and the companies have agreed to pay for them. For a contract to be legally enforceable by a court in the event of a breach, it must contain specific terms that clearly outline the expectations and obligations of all parties involved. It ensures that all parties have a mutual understanding of the terms of the agreement.

Acceptance

Acme Fireworks and the Company must adhere to the terms and conditions of the contract. Accepting an offer means concurring with its conditions, which calls for consensus between the parties involved. Nevertheless, Acme cannot coerce the company into signing a contract and cannot accept the offer under pressure. However, either party can decline the initial offer or present a modified offer until a mutually agreeable resolution is reached.

Awareness

For Acme and the Company to fulfill their obligations under the contracts, they need to have access to sufficient resources. All parties must have complete and accurate information regarding the contract and their responsibilities therein. Therefore, to sign the document, the individual must be of legal age, have their mental faculties intact, and meet any other requirements specified in the agreement. The agreement must be legitimate and effective so that both Acme Fireworks and the participating businesses know their obligations under the contract. Only then will the agreement be considered valid and functional.

Consideration

The parties need to agree on the consideration or payments that will be made for the services or goods. According to Rendtorff’s (2018) definition, consideration refers to the remuneration given in exchange for the delivery of goods or services. The compensation offered may encompass pecuniary recompense or alternative transaction modes. For instance, Acme Pyrotechnics dealt with the company on the costs of pyrotechnics that may be used in displays.

Mutual Consent

ACME is responsible for determining whether or not it possesses the resources necessary to meet the responsibilities outlined in its contracts. For Acme to live up to the terms of the contracts it has signed with other companies, it needs to be able to keep supplying fireworks to those other companies. Since the contract’s provisions must be compatible with the parties’ actual objectives, the parties’ level of legal expertise is also an essential factor.

Importantly, Acme must adhere to all the requirements of legally binding contracts to safeguard its interests. Likewise, the business must adhere to the components of legally binding contracts to protect itself if ACME Fireworks breaches the contract and seeks compensation from the business. To ensure the smooth functioning of the manufacture and operations of Acme fireworks, the businesses involved need features of enforceable contracts.

Acme Fireworks’ Potential Personal Liability

Suppose a public member is injured due to a stray firework during the ACME Fireworks’ fireworks display. In that case, the company will be held personally liable. Suppose a person is injured due to another party’s negligence. In that case, they can sue for compensation under tort law. Negligence occurs when one person fails to uphold a responsibility to another, and that failure causes that other person harm.

ACME Fireworks is responsible for ensuring spectators’ safety at a fireworks display. As part of the owners’ responsibilities, they must take all necessary precautions to ensure the crowd’s safety. Suppose ACME Fireworks fails to take reasonable precautions to protect the public from harm. In that case, the company may be liable for damages caused by a stray firework. To ensure the audience’s safety and limit their liability, ACME Fireworks should hire qualified personnel to set up and run the show. The company can also obtain all necessary authorizations, inspect the venue’s security, and inform attendees of necessary precautions.

Analysis of Employment Relationship and Arrangement in Light of Agency Law

Considering agency law, Acme Fireworks should thoroughly evaluate the pros and cons of each employment relationship and arrangement. When a company signs a contract to provide pyrotechnics for a corporation, it must find a way to expand its workforce to meet the increased demand for workers (Hoory et al., 2022). Under agency law, the company is responsible for the well-being of its new hires regardless of how it meets their need (Davidescu et al., 2020).

Acme can meet increased demand by hiring independent contractors rather than hiring its employees. Acme will have no authority over the contractors other than to manage their relationship with them. However, using freelancers has several significant drawbacks. Independent contractors cannot access employee benefits such as health insurance, retirement plans, paid time off, and sick pay (Davidescu et al., 2020). As a result, they cannot sue their employers for monetary damages under anti-discrimination laws.

However, the benefits of using employees far outweigh the risks, and Acme is legally liable for its employees’ actions. They report to the company directly and are eligible for employee benefits such as retirement plans, health insurance, paid vacation, and sick leave. On the other hand, a company is liable for employee actions that cause harm to others or even death.

Hiring new employees can be expensive. The company must follow many labor laws and regulations, such as those governing minimum wage, overtime pay, and discrimination. These are only a few of the drawbacks. The need for the company to pay unemployment insurance and other benefits complicates firing an employee for poor performance or misconduct. Acme Fireworks needs to assess the advantages and disadvantages of each employment relationship and arrangement concerning agency law.

Davidescu et al. (2020) say hiring independent contractors can reduce a company’s liability. However, it also means less oversight of worker behavior and possible disenfranchisement from employee benefits. On the other hand, hiring employees raises a company’s liability and compliance costs while giving it direct control over employee behavior and the ability to provide employee benefits. To meet its staffing needs while avoiding legal liabilities, the company must weigh the benefits and drawbacks of each option and select the best course of action.

The Rationale for ACME to Operate as a Limited Liability Company

Acme Fireworks would be subject to the owner’s assets and liabilities as a sole proprietorship rather than the business. Hoory et al. (2022) note that the owner’s personal funds, investments, and possibly even the family home could be at risk in case of a lawsuit against the sole proprietor. Rendtorff (2018) notes that raising capital for a sole proprietorship is difficult because the sole proprietor is the sole financier. This is the riskiest business structure since the owner has unlimited personal liability for all of the company’s debts and legal obligations. On the other hand, forming a Limited Liability Company (LLC) protects the owner’s assets from business debts and legal actions.

Acme Fireworks is vulnerable to legal action in an accident because it manufactures and sells explosives. Acme Fireworks, for example, could be sued for damages if a bystander is injured by a stray firework, putting the owner’s assets at risk if the company is run as a sole proprietorship. As a result, forming an LLC or corporation is preferable because it provides the business owner with limited liability protection.

Recommendation

Due to the risks of unlimited personal liability, Acme Fireworks should avoid operating as a sole proprietorship. An LLC formation protects the owner from personal liability by separating the business’s debts and legal obligations from the owner’s assets. Furthermore, there are numerous long-term benefits to converting a sole proprietorship to an LLC. To begin with, under an LLC structure, creditors of a founding member have limited access to the company to pursue debt collection. A charging order gives the creditor the legal right to receive just the distributions that are legally due to the member or the founder of the LLC.

Consequently, a Limited Liability Company is preferable to forming many legal companies for the same purpose. A Limited Liability Company also has lower start-up, ongoing, and regulatory expenses than many other business structures. Similarly, a Limited Liability Company can be set up with less formal documentation than other business structures. Forming, establishing, and organizing a Limited Liability Company are straightforward processes that provide its members with substantial extralegal protection against the company’s creditors.

Conclusion

Due to ACME’s rapid expansion, the company must switch capacities and legal forms. The shift from operating as a sole proprietorship to forming a Limited Liability Company is wise and beneficial since it will strengthen the company’s ability to fulfill the contract terms and better serve its business partners and clients. The increased safety and convenience with which others can engage with the organization are further benefits of transitioning from sole proprietorship to limited liability corporation status.

This shift is essential to the company’s success since it will boost earnings, expand its reach, and strengthen the safety of daily operations. Most significantly, the corporation offers growth and expansion prospects as a larger, operating limited liability company. The opportunity also allows the corporation to expand beyond its current location and capture a more significant portion of the market. Injuries and harm caused by employees to onlookers, especially when utilizing these fireworks, make lawsuits a possible threat to the company’s survival as it expands from a sole proprietorship to a Limited Liability Company. However, the company’s efforts to expand into a larger facility are commendable and will facilitate future growth and revenue generation.

References

Burtler, J. (2022). Elements of an enforceable contract. Study. Web.

Davidescu, A. A. M., Apostu, S.-A., Paul, A., & Casuneanu, I. (2020). Work flexibility, job satisfaction, and job performance among Romanian employees—Implications for Sustainable Human Resource Management. Sustainability, 12(15), 6086. Web.

Finnegan, D. L. (2020). Private ordering, dynamic merchant tradition, and the Uniform Commercial Code. Research Handbook on International Commercial Contracts, 181–195. Web.

Hoory, L., Haskins, J., & Watts, R. (2022). Sole Proprietorship Vs. LLC: Here’s what you need to know. Forbes Advisor. Web.

Rendtorff, J. D. (2018). The concept of Business Legitimacy: Corporate Social Responsibility, corporate citizenship, corporate governance as essential elements of ethical business legitimacy. Responsibility and Governance, 45–60. Web.

Uniform commercial code. Uniform Law Commission. (n.d.). Web.