Business Proposal: Analyzing ACME Fireworks Corporation's Operations

This report analyzes ACME Fireworks Corporation, addressing key business aspects. It determines the applicable contract law (common law vs. UCC), favoring common law due to the service-oriented nature of the business. The report examines business structure, recommending a Limited Liability Company (LLC) over sole proprietorship for liability protection and operational benefits. It explores potential personal liability from firework-related injuries, emphasizing the need for insurance. Furthermore, the report discusses various employment types and agency law, advocating for a balance between employee and contractor roles. The report concludes by explaining the drawbacks of a sole proprietorship and recommending an LLC structure, providing rationale for its advantages in terms of liability, taxation, and management.

Running head: ACME FIREWORKS
ACME Fireworks Corporation Proposal Paper
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Proposal Paper: ACME FIREWORKS
“Determine if the contracts with the businesses will be governed by common law or the Uniform
Commercial Code (UCC), and explain why”
Common law outlines the contracts with businesses for ongoing performances whereby
rules must be made through a court ruling (Friedman, 2011). On the other hand the Uniform
Commercial Code (UCC) is just an advance from the common law dealing with those
commercial business contracts that involve goods that can be moved from one place to another
(Hunter, 2017). The aim of making the Uniform Commercial Code (UCC) was to bring together
all the state laws under commerce as one law for all states. This would make trade between states
efficient.
The case of ACME Fireworks Corporation contains both aspects of common law and
UCC. The company offers its services through creation and performance display. The common
law applies on this aspect of the company. On the oth”er hand, fireworks are movable hence
constituting UCC. In determining the type of law that applies to ACME Fireworks Corporation,
common law is more suitable than UCC because despite fireworks being movable, they can only
be sold as a unit and not separately. Customers by the show inform of performances, set up and
display and not individual fireworks. The nature of operation of the company is largely display
and not mobile hence requiring the concepts of common law not UCC.
Common law covers contracts related to both services and goods. These goods and
services are referred to as hybrid services hence eliminating the application of UCC since the
common law can separate services from goods (Hunter, 2017). The nature of goods dealt in is

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purely a service good involving the display of fireworks for an agreed period after which the
contract ends. They sell the service (Display) and not the goods (fireworks).
Business corporations can consider a number of factors when deciding on the type of
business structure that is best suited for their company. A business such as ACME Fireworks
must consider those factors that offer the best in terms of protecting the company’s returns on
investment, the operation of the company and the favorable rates of tax. Sole proprietorship is
not suitable for ACME Fireworks considering the underlying factors such as the needs of
employment, liability of the company and the number of contracts being handled. Therefore, a
Limited Liability Company will be the most suitable form of business structure for ACME
Fireworks.
ACME Fireworks Corporation’s nature of business is risky in the sense that the
possibility of firework displays causing harm to people is high. Fireworks are hazardous that
cannot only harm individuals but also personal assets and property leading to a lawsuit
(Sandvall, et al., 2017). ACME Fireworks Corporation requires highly skilled labor for the
execution of display of fireworks and the artistic display of the same. This will help reduce the
level of risk involved in operating the firework business. Skilled labor reduces the number of
errors hence reducing the number of damages that may occur in a single or multiple display of
the fireworks. It is by common law that every business must be aware of the risks involved and
consequences of breach of any contract by either party. The company requires enough employees
to carry out some of these tasks as well as correctly implement the display requirements of the
fireworks. Outsourcing and contracting are some of the options that can help ACME Fireworks
Corporation manage some of its functions efficiently by reducing cost and increasing returns on
investment.

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“Analyze whether the owner formed a contract with the businesses, and apply the five essential
elements of an enforceable contract”
According to Friedman, (2011), a contract is defined as legally enforceable agreement
between two or more parties that voluntarily agree to enter into a contract enforceable by law.
Common law further introduces express contracts involving the offeror and offeree whereby the
offeree must accept the offer for a contract to be legally binding and enforceable. In the case of
ACME Fireworks Corporation, the representatives from large businesses inquiring about
contracting with the company for display evets are the offeree while ACME Fireworks
Corporation is the offeror or vendor. ACME Fireworks Corporation agrees to the request to
fulfill to their requests as the offeror. ACME Fireworks Corporation further quotes a price for the
whole exercise of setting up displays for the evets hence an offer is made and a contract
established. Up to this point, the offeror and offeree have established what we call a mutual
accord.
As discussed above, a contract has different elements. The first element is the offer which
is made by the owner of the service. Second is the element is acceptance, which involves the
agreement to the price offered by the offeror by the offeree. Third, a consideration is made for
the contract to be established, hence the fourth element. A consideration is described as the
service that is provided at an agreed price for example ACME Fireworks Corporation considers
to provide a fireworks display for the company. The fifth element is the legality of the contract
for it to be enforceable (Friedman, 2011). It involves the surety that all services provided have
been acquired through legal means. Lastly, the final element for a valid contract is the capacity to
contract. When entering a contract, contracting parties are assumed to be sober and no influence
or duress. This ensures that the decisions made at the time of contract are rational to the best of

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their knowledge. None of the parties should be under the age of 18 (adult) unless otherwise
stated by law to allow the minor to enter into contract.
“Explain the potential personal liability to Acme Fireworks if a spectator is injured by a stray
firework from a fireworks display”
Operating a fireworks business is definitely a risky affair due to the hazardous nature of
fireworks. This type of liability is called a strict liability under the law of tort. In the event that a
spectator is injured by the fireworks, ACME Fireworks Corporation will be liable for causing an
inherent risk. It is an injury caused to an individually due to an involvement in an activity that is
dangerous but not willingly (Friedman, 2011). ACME Fireworks company needs to insure its
company against such incidences of tort. The company can easily manage this insurance cover
when it is a limited liability company and not as a sole proprietorship.
ACME Fireworks Company cannot go out of business due to any malfunction or
negligence during the operation of business. The business risks being sued for negligence,
product liability including the owner of the business, manufacturer of the products, and all the
employees. Therefore, ACME Fireworks should consider taking insurance and liability cover for
its business to be on the safe side (Sandvall, et al., 2017).
“Discuss the different employment types and relationships relevant to agency law and analyze
the advantages and disadvantages of each type specific to Acme Fireworks”
ACME Fireworks Corporation has employed 15 members of staff working in an office.
The owner of the company can employ more staff both on permanent of contractual basis.
Outsourcing and contracting is the safest and profitable way of operating business since it
includes staff that are skilled. Furthermore, the long processes of filing taxes, development of
careers, evaluation and appraisals, and extension of contracts are not necessary saving the
company of too many costs. The accounting and finance department can be subcontracted to

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reduce the number of employees. The department could be made one to handle the functions of
accounting and finance by once person. Technicians can be reduced to one skilled pyro
technician to handle the tasks of display of fireworks.
Companies save up to 32 when they choose to hire independent contractors. The benefit
of hiring independent contractors involve savings on pay roll taxes, insurance for the
unemployed, cases of disability, compensation of workers, insurance such as health, pensions,
leaves for sickness, maternity or vacations.
In subcontracting these functions, ACME Fireworks Corporation will save on cost of
providing an office since the contractors work from their offices using their tools and have a
proper schedule in terms of time management. However, cases such as the scrutiny of IRS is
required since it can lead to federal problems. Payroll taxes reach up to 16 percent and they
include; local taxes, state taxes, social security as well as healthcare (Guest, et al., 2010). Failure
to file payroll taxes is a serious offence and the company must ensure that contractors have taken
up this responsibility to avoid many problems with the law.
Besides contracting, there are also benefits that come with having your own employees.
One is that, the company can avoid attracting IRS audits for tax evasion. Employees are termed
as loyal to the company compared to contractors who only work at convenient times. The
knowledge of an employee is termed as the property of the company unlike the creations and
innovations of contractors. Copyright are only given to a company for innovation from its
employees and not contractors. However, there are more costs associated with employees as
already discussed in the above paragraphs. ACME Fireworks Corporation can choose among the
duties to contract and those that require permanent employees in order to balance between costs
and profits for the company.

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“Explain why Acme fireworks should not operate as a sole proprietorship. Recommend a new
business, and provide rationale to support your recommendation.”
Most business entities would prefer to start as sole proprietorships with the main reason
being the financial constraints (Jelsma, & Nollkamper, 2017). In addition, sole proprietorships
are easy to manage and require little in terms of taxation. Resources can easily be put together
from the owner’s assets and savings to run the company. ACME Fireworks Corporation might
have started as a sole proprietorship but then its size cannot allow it to continue running as one.
With time, the events and clients will become more and the business will have to expand hence
management will be a problem under sole proprietorship.
ACME Fireworks Corporation should consider forming a limited liability company. A
limited Liability company combines the characteristics of both corporations and partnerships.
ACME Fireworks will be able to enjoy a higher level of protection when operating as a Limited
Liability Company while spending less cash and saving on the amount of paperwork involved.
The company operates as a separate legal entity such that it can sue or be sued (Jelsma, &
Nollkamper, 2017). If sued, only the assets of the company will be pursued and not the personal
assets of the members of the company.
In addition, Limited Liability companies allow its owners to benefit from tax benefits,
reduced costs of operation and business expenses. The gross revenue is normally deducted to
cover for the expenses as well as for those assets that are depreciating. There are a number of tax
benefits from operating a Limited Liability company (Jelsma, & Nollkamper, 2017). Profits
gained by the company are taxed at the member level while those at the company level are
retained on ploughed back to the business. Owners of the company enjoy asset protection status
till the company is wound up. The amount of work involved in the administration and book

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keeping is less compared to other forms of company structure or entities. Profits and losses are
shared equally among members such that in the event of a profit or loss, no member is left better
off than the other. Title cannot be transferred to the membership interest.
In conclusion, operating a sole proprietorship means that an individual is responsible for
all the aspects of the business such as debts, losses and legal liabilities. It is easy to loose
personal assets while operating a sole proprietorship. Limited Liability Companies on the other
hand are secure and easier to operate. ACME Fireworks is better of as a Limited Liability
Company than a sole proprietorship. Contract law under the common law states that, contracts
can either be in writing or stated and still be binding as long as the five elements are put into
consideration. ACME Fireworks will gain more profits running as a Limited Liability Company
and using contracting as a means of employment to reduce costs and increase revenue.

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References
Sandvall, B. K., Jacobson, L., Miller, E. A., Dodge III, R. E., Quistberg, D. A., Rowhani-Rahbar,
A., ... & Keys, K. A. (2017). Fireworks type, injury pattern, and permanent impairment
following severe fireworks-related injuries. The American journal of emergency
medicine, 35(10), 1469-1473.
Friedman, L. M. (2011). Contract law in America: a social and economic case study. Quid Pro
Books.
Hunter, H. (2017). Modern Law of Contracts.
Jelsma, P. L., & Nollkamper, P. E. (2017). The limited liability company. LexisNexis.
Guest, D. E., Isaksson, K., & De Witte, H. (Eds.). (2010). Employment contracts, psychological
contracts, and employee well-being: an international study. Oxford University Press.