General Corporation Law: Assignment

Added on - 17 Oct 2019

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To: SupervisorFrom: EmployeeRe:Career Institute of America, Inc. (CIA)Date: December 6, 2016Summary of Applicable Facts:The Career Institute of America Inc was formed as a non-profitcorporation under the Delaware non-profit association Act. It providesonline and classroom training to students and the revenues aregenerated from the fees paid by the students. The company has alsoreceived a onetime grant from the U.S. Department of Labor available tonon-profit organizations. The CEO therefore is reconsidering CIA’s non-profit status.The training courses at CIA are currently conducted by independentcontractors who are not under regular employment in the organization.Although the agreement between the company and the trainers doesnot clearly indicate the status, CIA now needs to communicate to itsinstructors that their status is that of independent contractors and notthat of employees.Issues:The key issues for the business currently areWhat is the most appropriate form of business organization forCIA?How can the contracts reflect the status of instructors asindependent contractors and not that of an employee of thecompany?Law:Business LawThe current laws relating to The General Corporation Law is designed toprovide the ease of carrying out of business, change the status of theexisting business and also allow change in the business structure.Business owners wanting to incorporate their businesses in Delawaremay do so by registering as corporations, Limited Liability Companies,non-profit associations or as professional service corporations. Other
than the above discussed the options available are sole proprietorshipor partnership. Given the fact that all business ownerswould want toprotect their personal assets from being used to pay business debts,Limited liability is a key to protect the interests of all business owners. Ifin a circumstance where the business lacks funds to pay off companydebt, or creditors, a lawsuit, the owners cannot be held liable for thesame.Independent Contractor LawWhat differentiates the status of an employee from that of anindependent contractor is the extent to which the employer has controlover the means and methods, process of completing the work. Anindependent contractor determines how the work has to be donewhereas an employee is guided by an employer as regards performingtheir job. Employers are required to pay payroll taxes, provideunemployment insurance and workers compensation benefits for theemployees. Independent contractors are governed by their own workinghours, paying their own income tax, employment taxes and providing fortheir benefits.[ CITATION NIF15 \l 1033 ]Analysis:Business OrganizationCIA should give up its status of a non-profit. The company earns itsrevenues on fee basis and does not meet the criteria of non-profit. CIAmay therefore choose to organize its business as a Limited LiabilityCompany or a Corporation under the Delaware corporation law[ CITATION Fox06 \l 1033 ]. By doing so, the CEO will benefit from itsLimited Liability protection. The company can register by filing itsArticles of Incorporation and have their owner’s draft bylaws (in case ofa corporation) and Articles of Organization along with an operatingagreement (in case of LLC). This details the duties, responsibilities andpowers of officers, owners, corporate shareholders, LLC members,managers and the board members. This involves certain amount ofdocumentation and filings as required under law. Having a status of acorporation or LLC will ensure that the CEO retains majority control overthe business.However, considering the ease of business and flexibility in mattersconcerning taxes, appointment of managers etc., it is recommended
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