Question

Create an Issue, Rule, Application to the rule, and a Conclusion for the following scenario: 38–2. Special Business Forms. Bateson Corp. is considering entering into contracts with two organizations. One is a joint stock company that distributes home products east of the Mississippi River. The other is a business trust formed by a number of sole proprietors who are sellers of home products on the West Coast. Both contracts will require Bateson to make large capital outlays in order to supply the businesses with restaurant equipment. In both business organizations, at least two shareholders or beneficiaries are personally wealthy, but the organizations themselves have limited financial resources. The owner-managers of Bateson are not familiar with either form of business organization. Because each form resembles a corporation, they are concerned about potential limits on liability in the event that either organization breaches the contract by failing to pay for the equipment. Discuss fully Bateson’s concern.

Answer 1

Answer:The joint stock company has a limited liability while the business trust of sole proprietorship has a limitless liabilities.

Explanation:The shareholders of the joint stock company has liability to the extent of their shareholding rights,i.e if the company goes under or seize to exist as a going concern,the only loss to the shareholders is their investments in the company not their personal wealth or investment in other clime.

For a sole proprietorship,in case if default in paying Bateson for the supply of restaurant materials ,A lien can be place on both the business and the personal wealth of the owners of the business.

So in joint stock,Bateson should find out the worth of the shares of the shareholders including the wealthy ones and know the extent of their investments before embarking on the business to see if in event failure of the company ,if they will be able to recover it's money.

In the case if the trust of business proprietorship,in event of failure the liability of the owners is not limited to the companies wealth but extends to the personal wealth of the individual owners.