BLAW2003 assignment 2

| August 31, 2016

Question
BLAW 2003 SECOND ASSIGNMENT

DUE: A typed, hard copy is due at the beginning of class on, November 28, 2014. Late papers will be penalized 2% per day and will not be accepted after December 3.. Late papers may be submitted as a word document by email (.ca”>mgibbons@georgebrown.ca) but if you would like comments, you must give me a hard copy. I will acknowledge receipt of emailed papers; please check for confirmation.

Weight: 15% of the final grade

This is an individual assignment. Please proof read carefully as marks will be lost for poor spelling and/or grammar. Be sure to set off all quotations within quotation marks and to provide footnotes. Remember that duplicate papers will both fail.

Your friend Jennifer is excited to start a new business which she is confident will be successful. However since she can only contribute $10 000 to the business, she needs her father’s (Robert) financial assistance for start up costs. Her father is able to contribute up to $50 000 but wants a number of safeguards. He wants to know that he will not lose more than his investment, he wants a 5% return on his investment, he wants to take an active role in management (since he does not trust Jennifer’s business knowledge) and he does not want any liability for anything which might go wrong. He probably cannot achieve all of these goals. Advise Robert of the consequences of the following with regard to his stated goals:

1. If Robert and Jennifer enter into a partnership, to what extent can he achieve his goals? Explain. (4 marks)

2. How could Robert become a limited partner? How would this affect his goals? What would be his legal rights and obligations? (4 marks)

3. If the business were to incorporate in Ontario, what capital structure do you recommend? (Hint: Robert and Jennifer are investing different amounts of money). (10 marks)

4. If the business were to operate as a closely held business and Robert was a shareholder, what are his legal rights and obligations? Which of his goals could he realistically achieve? Explain. (2 marks)

5. If the business were to operate as a closely held business and Robert lent money to the corporation what are his legal rights and obligations? Which of his goals could he realistically achieve? Explain. (2 marks)

6. If the business were to operate as a closely held business and Robert was a shareholder and a director, what are his legal rights and obligations? Your answer should include a discussion of potential areas of director’s liability. Which of his goals could he realistically achieve? Explain. (5 marks)

7. Bearing in mind all of Robert’s goals, how would you advise him to proceed? Why? You should also consider the possibility that Jennifer owns the business as sole proprietor and Robert gives her a loan. (3 marks)

Your answer must be specific in providing clear advice to Robert. Do not simply summarize the material in the textbook. Demonstrate your knowledge and understanding by providing Robert with the information he needs for his specific situation. Note that question 3 is worth 10 marks – this would suggest that a detailed analysis is required.

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