Running head: COURSE PAPER 1

Course Final Paper

Jessica Valverde

Florida National University

Business Law II

Professor Hiram Paz

December 7, 2015
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Course Final Paper

Question 1

When starting a business, three factors are important for its success. The three factors

are: (1) a product or an idea of how to create the product. (2) the financial resources to finance

the making of the product and to run the business. (3) the marketing tools to get the customer to

like and pay for the product (Gage, 2004). Mr. Paul Peters has a third of the requirements. To

make his business dream into a reality, he will need the input of Ronald Robinson, who is a

marketing expert and Sara Sanders, who can provide the financial needs of the business.

The best way for him to use his innovations to make money is to enter into a partnership

with the other two. In a business partnership, he is guaranteed of getting Sara to invest her

money in his idea and Ronald to market the products. The two would benefit by getting to own

part of the business and would receive a share of the profit made. If Paul accepts the partnership

model of business, he must insist on the partnership being a general partnership. The general

partnership would ensure that all the three shareholders have unlimited liability for the debts that

the business may incur. It would ensure that the other two partners work as hard as him to make

the business work as all of them stand to lose if the business fails.

Paul should also insist on being the majority shareholder as it would give him the

majority vote when they make business decisions (Gage, 2004). It would ensure that the business

retains the vision he hard for it when it started. Majority shareholding would also ensure that the

other partners do not kick him out of the business if it became successful. Paul should avoid a

limited partnership model or any agreement that would make him have less than 51% shares in

the company. A limited partnership model would make his partners responsible for limited

liability of the business leaving him to carry the burden of paying the creditors’ if the business
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failed. A minority shareholding would give his partners power to ignore his views when making

business decisions. In forming the partnership, Paul must ensure that he has a lawyer and an

accountant to help draft the partnership agreement that all the partners should sign. Paul must

ensure that the business is registered with the government and issued with the necessary

operating and tax licenses (Gage, 2004).

As shown in the paper partnership is the best model for Paul. However, he must ensure

that he gets the best deal for himself.

Question 2

In many business operations, competitions exist. It is the responsibility of the managers

of the business to develop strategies to beat the competitors. The model that Paul has chosen is

price war. It is never advisable to go into a price war as regardless of who wins every competitor

is left at a disadvantaged position. Paul can learn the prices wars of US airlines in 1992. When

the price war ended, all the airlines had incurred losses that were more than the total profits that

they had made since their inception.

If Paul chooses to lower his products prices, it may not make the competitors lowers their

prices. They may choose to make their product better or provide customers other favors to make

them choose their products over Paul’s. Paul’s actions would, therefore, be counterproductive.

Paul would struggle to respond to the competitors move as he would have spent all the business’

money subsidizing the products. Even if Paul has enough money to offset the losses that he

makes during the period when he was engaging in the war, and manages to push completion out

of business, competition will join in when he finally raises the prices (Gage, 2004). He cannot

expect to remain in business for long if the continues with the cycle. Paul needs to develop better

methods, like product differentiation to attract customers.

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Question 3

If a partnership business becomes unsustainable or for any reason he partners do not want

to continue working together, they can dissolve the partnership. However, there are some

procedures that the partners must follow. If Paul and his partners want to dissolve their

partnership, they should revisit their agreement. Many of the agreements drafted by a lawyer

have a provision for ways to dissolve the partnership. Legally state laws provide for ways to

dissolve partnerships; they should visit their state’s website and download the dissolution form,

feel it and send it back. It usually takes 90 days for the partnership to be dissolved. Dissolution is

important as it ensures that no partner is responsible for the others debt moving forward. It

prohibits any of the partners from entering into a binding agreement on behalf of the other

partners (Gage, 2004).

Filing for bankruptcy should be the last option step. However, if Paul wants to file for

bankruptcy, he should be aware of the following consequences.

1. His credit will be destroyed for up to ten years (Warren & Bussel, 2006).

2. He would lose all the properties that are not excluded by the bankruptcy trustee. The

properties would include all luxurious goods and credit cards.

3. Filing for bankruptcy now would make it impossible to file for it again even if things get

worse for over five years.

4. Even if he is declared bankrupt, he would still have to pay up some debts like mortgage

loan and student’s loan.

If Paul is willing to take the stated conditions among others, he should file for

bankruptcy.
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References

Gage, D. (2004). The partnership charter: How to start out right with your new business

partnership (or fix the one you're in). New York: Basic Books.

Warren, W. D., & Bussel, D. J. (2006). Bankruptcy. New York: Foundation Press.