Business Organization and Business Torts
1.You are the CEO of a corporation. After attending a business conference in Hawaii, you and some other CEOs you met at the conference decide to relax and unwind with a few drinks at the hotel bar. The hotel bar closes, so you and the other CEOs decide to go back to your room and continue the party. You proceed to raid the large whiskey collection in your minibar. Your memory becomes hazy at this point, but you wake up the next morning and find the hotel room is completely trashed. The hotel sends you a $50,000 bill for the damages. Are you personally liable for this bill, or is it only the corporation that is liable since you are a CEO and the incident happened during a business trip for the corporation?
2. You and two other business associates are owners of a limited liability corporation that owns and operates several restaurants. One of your waiters takes an order for hot tea from a customer seated at a table. The waiter places a teapot of hot water and a teacup with a tea bag on the table and turns to take an order from a customer at another table. As the waiter turns, he bumps into a third customer on her way to the restroom. The waiter jostles the table with the teapot, spilling hot water into the lap of the first customer who has to be taken to the hospital by ambulance because of burns. Would this be a tort? If so, would it be an intentional or an unintentional tort? Finally, would you, as an owner, be personally liable if the injured customer decided to sue?
3. You form a corporation with two other investors. Keneisha is putting up 60% of the initial investment for the new corporation, while Terry and you are each putting up 20%. When you form the bylaws for the corporate charter, it is agreed that Keneisha will choose six of the 10 members of the board of directors, Terry will choose two, and you will choose two, so your influence on the board is directly proportional to each of your investments. Per the bylaws, the board of directors has the authority to select and hire the CEO of the corporation, and the board chooses a CEO that all three of you are happy with. But then over the holidays, Keneisha goes on vacation, as do four board members. Terry and you recommend to the remaining six members of the board that they fire the CEO. The six members vote to fire the CEO and appoint Terry’s brother-in-law as the new CEO. Upon learning of the change, Keneisha is furious that the CEO was fired without consulting her, especially since she owns 60% of the company stock. She is determined to regain control, even if it means going to court. Do you think she would prevail in court?
4. You are visiting your regular barber who owns an old-fashioned barbershop with a heavy barber pole mounted next to the front door. As another customer, Sam, grabs the front door handle to push the door open, the barber pole falls to the ground, missing Sam’s foot by inches. Sam faints. The barber runs to Sam’s side. Sam revives almost immediately and stands up with the barber’s help. The barber is extremely apologetic. Sam seems fine and stays to get his hair cut. A few days later, Sam calls the barber and tells him he can’t stop thinking about what happened, that the barber could have killed him, and that he is going to sue the barber because it is the barber’s responsibility to make sure his barber pole is mounted safely. In this case, did the barber commit a tort? If so, was it an intentional tort or an unintentional tort? Explain your reasoning.
5. You are the sole proprietor of a small occupational therapy practice that is rapidly growing, but you need to raise additional money to fund your expansion. You talk to several friends and family members about making them partners in your business in exchange for investing in your business. However, they tell you that even though they have confidence in your business, they are too busy to be your business partners. They also do not want to be liable for your debts if you go bankrupt or for any lawsuit that you face. They also aren’t interested in getting involved in the taxes due on dividends from stocks. Furthermore, you find out that limited liability companies are not allowed in your state for healthcare practitioners (LLC laws vary state by state). What kind of legal structure do you think you should switch to in order to help persuade your friends and family members to invest in your business? Explain.
