There are three potential business organization structures that CARDWARE can consider on the island of Cashmester. The first would be to set up a limited partnership with a local entity or individual on the island. This type of business entity would see the limited partner oversee a specific element of the business on the island, such as production or retail but not partake in the general management of the company. CARDWARE as a general partner would oversee the management of the company and have unlimited liability for debts, while the limited partner only maintains the liability for their investment.
This structure has the advantage of having a partner with a specific strength (this case, local business expertise) on the financial or managerial side, but protects their liability which is highly attractive since they cannot lose more money than they put in. There is also no limit on the number of partners or cap of investment. The disadvantage is mostly for the general partner, who is fully liable, including with personal assets. Partners may lack legal distinction and the business entity has much less tax protection and advantages compared to a LLC (Miller, 2015).
Another option would be to set up a limited liability company (LLC) on the island, a preferred structure for small businesses. These are companies formed in compliance with state laws, and owners, similar to that of shareholders in a corporation, have limited liability. LLC offer little administrative framework and choice on which tax regime to use. The primary disadvantages are that most states lack statutory provisions regarding LLCs as well as the difficulty of raising capital and the prospect of facing capitals taxes in jurisdictions.
Finally, CARDWARE can establish a sole proprietorship business structure. It is the simplest form where the business is owned and run by one individual and there is no legal distinction between the owner and the business. All the profits are kept but the downside is that the owner is responsible for all the legal and financial risk (Miller, 2015).
Considering the product, brand, and market-driven nature of CARDWARE, and the aim of setting up a physical point of marketing and sale on the island, the best business structure to adopt would be setting up a separate company as an LLC that would serve as a subsidiary to the main business. This is the correct choice due to legal repercussions, which typically result in the owners of the LLC, which would be the owners of CARDWARE not having legal responsibility. Along with a lax tax framework. An LLC model would allow CARDWARE to maintain all creative and quality control that would be lost with a franchise but avoid the risks of a sole proprietorship.
In order to form an LLC in New Jersey, one needs to file a Certification of Formation with the state government. It is a legal document detailing the name of the company as well as a registered agent, the individual or entity that will receive legal mail or be contacted. The Certification of Formation and be filed online, mail, or in person and it is relatively simple. Once approved by the state, one should apply of an Employer Identification Number (EIN), which is necessary for tax and filing purposes.
This information is also needed for opening a bank account in the LLC name which is critical. After, a New Jersey LLC Operating Agreement has to be signed for both single and multi-member LLCs which outlines ownership and profit sharing. In New Jersey, all LLCs regardless of size, revenue, or business activity must file an Annual Report. It is important to note that all specific 3business license and permits are gained at the municipal level (NOLO, n.d.).
Bo Jenkins is selected to be the business agent representing CARDWARE’s interests. A business agent is an individual who effectively manages business affairs of and on behalf of the company. Depending on the type of contract negotiated with the business, the agent has broad or limited duties. As a business agent, the primary duties of Jenkins would be to negotiate contracts for the company. These responsibilities include negotiating the best financial and legal terms for the client in respect to their business interests. Business agents sometimes may be involved in management of finances of the company. If necessary, the agent schedules meetings and public appearances. Also, the role of a business agent entails being a client’s public-relations officer of sort. They oversee marketing and creating a positive public image for the company (Market Business News). In this case, Jenkins would oversee any marketing promotions and initiatives for CARDWARE on the island.
According to Miller (2015), an agent has five key duties to the principal. First is performance, that the agent will use best diligence and skill to perform their duties without liability. Second is notification, with the principal require to make the principal aware of all matters regarding the subject matter of that agency. Third is loyalty, which means the agent has the responsibility to act solely for the benefit of the principal, not the interest of third parties. Fourth is obedience, with the agent having to follow all instructions or indications from the principal, deviating from this unless it clearly serves the best interest of the client, is a violation of duty. Finally, accounting, where the agent has the duty to account to the principal any property or funds that spent and received on behalf of the principal.
International law should be considered in this element. First, there are three clauses to consider when creating international business contracts, which are choice of language (as evident), forum selection (court or method of negotiating any disputes), and choice-of-law (which country’s law should be used for litigation, the location of the business or the home country of the parent company). Establishing a subsidiary is one of the most effective methods of conducting international business. However, there should be considerations for international law such as in the concept of investment protection to guarantee one’s property and ensuring that local laws are followed. Furthermore, since goods will be shipped, there are issues of export controls to consider ranging from regulations to economic elements such as quotas and tariffs (Miller, 2015).
CARDWARE as an employer is liable for the conduct of their employees when on the job. An employee is someone who is hired to work for an employer for compensation and is subject to the employer’s direction. Employees working with third parties are deemed to be agents. The primary difference between an employee and an independent contractor is that the employer controls the methods and conditions of the employee, but do not oversee the contractor, but the latter can still be agents legally.
The employer is also expected to follow all regulations under the Fair Labor Standards Act (FLSA) under which an employer can be held liable for violating standards for wages, overtime, breaks, or many other labor practices. Some liabilities that can be considered include injury liabilities at any point during employment, including in manufacturing, retail, or transportation. There is also potential for wage and hour claims under FLSA or violations of the Family and Medical Leave Act (FMLA). An employer can be liable for any social elements such as discrimination, harassment in hiring practices or during the fulfillment of duties. Employers are also liable for any alternative work arrangements such as telecommuting or staggered schedules if they any laws are broken (Andrews & Levine, 2015).
An element to consider in cases of liability are the Coming and Going rule as well as the detour vs. frolic debate. In the Coming and Going rule, an employer is not liable when an employee is commuting to work, unless travelling is a major element of the job, the travel is between various job/company locations, or potentially if an employee is utilizing a company owned vehicle. The detour vs. frolic argument is once again a consideration of an employer’s liability in the scope of employment. If an employee took a slight detour while on the job, either literally in a car, nearby their route, or potentially stepping outside the building for a break, then the employer continues to be liable.
However, a frolic is when an employee deliberately went out of the way, outside of the context of their job or reasonable detours, then the employer is not liable for any injury or accidents that may occur. If CARDWARE at any point hires independent contractors, typically an employer is not liable for an independent contractor, either if they injure themselves or somehow injure third parties in the process of their work (Miller, 2015). The only exception is if the contractor can then strongly demonstrate that an employer’s negligence caused the injury/accident, but due to the nature of contractor work (they utilize their own equipment, transport, etc), it is rare.
References
Andrews, W. J., & Levine, M. S. (2015). Top 10 employment liability concerns. Web.
Market Business News. (n.d.) Business agent – definition and meaning. Web.
Miller, R. L. (2015). Fundamentals of business law today: Summarized cases (10th ed.). Cengage.
Fisherman, S. (n.d.). How to form an LLC in New Jersey. Web.