Question

A. Norman is the chief executive officer of Acme Widget Corporation. Norman’s responsibilities include decisions on product development, marketing, and other significant business directions. Norman is subject to the approval and oversight of Acme Widget Corporation’s board of directors. Mickey is a Acme Widget manager whose duties include the firm’s day-to-day hiring, firing, purchasing, and selling. Echo is an Acme Widget salesperson, whose daily activities are controlled by Mickey. Eugenie writes sales manuals and promotional materials for Acme Widget Corporation’s products according to Norman’s instructions and subject to Acme Widget Corporation’s control, but has no dealings with the company’s customers or suppliers. Betty writes copy on a contract-per-project basis and is not otherwise subject to Acme Widget Corporation’s control.

Who is a principal, why and what does this mean? Who is an agent, why and what does this mean? Who is an employee, why and what does this mean? Who is an independent contractor, why and what does this mean?

B. Sarah, the owner of Sushi Sushi, is a sole proprietor. What are the chief characteristics, advantages, and disadvantages of this form of business organization? Sarah wants to obtain additional capital to expand Sushi Sushi, but she does not want to lose control of the firm.

As a sole proprietor, what is her best option to attain these goals?

C. Sarah subsequently decides to take in a partner. Sarah and Bill form a partnership—Sushi Sushi Partners. Bill’s capital contribution is $10,000 in cash, and Sarah’s is the existing business which is valued at $15,000. The partnership agreement provides that profits are to be shared, with 40 percent for Bill and 60 percent for Sarah. Later, Bill makes a $10,000 loan to the partnership when it needs more working capital. After a few successful years Sarah decides to leave the partnership to become a franchisee in another type of restaurant business.

When the partnership is amicably dissolved, its assets are $50,000, and its debts are $8,000. How should the assets be distributed?

D. The franchisor which Sarah decides to take a franchise from is called Chippy Cheddar Chips, Inc.. Chippy Cheddar Chips imposes on its franchisees standards of operation and personnel training methods.

What is the potential pitfall to Chippy Cheddar Chips, Inc if it exercises too much control over its franchisees?

Answer 1

Who is a principal, why and what does this mean? Who is an agent, why and what does this mean? Who is an employee, why and what does this mean? Who is an independent contractor, why and what does this mean?

• The principal is the Acme Widget corporation’s board of directors. The principal appoints the agent to manage the business on their behalf. The principal is normally the investors but is not involved in the day to day management of the business. The principals' duties include as follows:

1. Appoint agent for day to day operations
2. Compensate the agent as agreed
3. Indemnify the agent against any liabilities, claims, and expense incurred during performing duties assigned by the principal.

• The agent is the CEO of the company Norman. He works under the direction of the agent i.e. the board of directors. He is subject to the approval and oversight of the Acme Widget corporation.

The agent is appointed by the principal. He acts on behalf of the principal. Agent duties include the following:

1. Act on behalf of and subject to the control of the principal
2. Act within the scope of authority delegated by the agent
3. Discharge his duties with diligence and care.
4. Avoid conflict between his interests and the principals' interest.
5. Hand over all profits collected on behalf of the agent.

• Mickey is the HR manager and an employee. He is responsible for day-to-day hiring, firing, purchasing and selling. Echo the salesperson is also an employee-controlled by Mickey. An employee is a person hired by the corporation to perform certain specific duties in exchange for compensation or fee paid on a monthly or weekly basis. The employee works under a contract written or oral, express or implied. They have specific duties and are also referred to as workers. The employee has to follow the instructions and the goals defined by the corporation.

• Betty is an independent contractor. She writes copy on contract on per project basis. She is otherwise not under the control of the corporation. An independent contractor is a person, business or corporation which provides goods or services to another entity as per contract or verbal agreement. A specific service predefined is provided for mutually agreed compensation and terms. The contractor can have many such agreements with multiple businesses at the same time. The company will not withhold the taxes of the independent contractor. Employment laws also do not apply to the independent contractor.

• “answering 4 parts of the questions, please resubmit the balance questions.”