Business Formation Legal Advice Case Study

This case study presents a legal opinion provided to Fred and Sally regarding the formation of their new business. The advice covers various aspects including different types of business entities such as sole proprietorship, partnership, and corporation, product liability issues related to Fred's cough syrup, the agency relationship with Sam, potential real and personal property issues, manufacturing concerns, estate planning, and transfer of ownership. The opinion suggests a Limited Liability Partnership as the most suitable option for Fred and Sally due to its low-cost start-up and limited liability.

Case-1

Dear Fred and Sally,
Thank you for appointing me as an attorney to assist you in the formation of the new business. I
will be providing you the detailed guideline on the following topics, which are the essentials to
start on a new business. The topics covered herewith are: -
Types of business entities
Sole Proprietorship, Partnership, and Corporation is the main business entities. As the name
suggests the Sole Proprietorship is where there is a single owner liable for all the business
decisions and have the sole right to the property, on the other hand, Partnership is between two
or more persons, and is generally divided into two categories and they are General Partnership
and Limited Partnership. General Partnership is one where two or more partners have the duty to
share the management and is personally liable for all the debts, but, in Limited Partnerships the
partners are only limited to the amount they contributed towards the capital and in this type of
partnership one partner is not involved in the daily activities and the other partners acts like the
general partners. The third main business entity is the Corporation, where a separate legal entity
is formed and the investors buys the stocks and the board manages the business.
Product liability
Product liability makes the seller or the manufacturer of the product, being held liable for
production of the defective products into the hands of the consumers. So, the manufacturer is
primarily responsible for any defects as to the product. In her, your product Fred’s Miracle

Cough Syrup have severe reactions if taken with the aspirin, so this product does not meet the
expectations of the consumer (Wilkes v DePuy International Limited , 2016).
Agency relationship
Agency is the fiduciary relation between the principal and the agent. Sam is already assisting
Fred in doing the deliveries, so there is a relation, since when Sam is delivering the product to
the customers i.e. the third party, he is actually acting as an agent to Fred’s product, and this
relationship will not be ruined if any of the business entities previously discussed is opted for
(Clarmoda Ltd v Zoomphase Limited, 2009).
Potential real property issues
As the landed property is in the family farm, so it can be understood that it is in the outskirts and
also it is tied up to that particular place and the long- distance from the mainstream city is the
obstacle which needs attention.
Manufacture
In (BOOTH v. THE COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF
AUSTRALIA, 1987), the Court held that when an owner earns from the land, then that right is
an abstract right and cannot be taken for action in the Court of law, but the products of the land
can be the possible course of action if the rights gets infringed there, so in this aspect, Fred is
manufacturing the product for selling and not for personal use, so the manufacture of Fred’s

Miracle Cough Syrup on the family farm necessitates a formal transfer of ownership or
possessory rights.
Potential personal property issues and liability issues
Until and unless there is any harm caused by the employee or Sam to be specific, then there is no
personal property issue that may arise. If only there is any harm caused to a third party, then Fred
will also be responsible under vicarious liability due to the negligent act on part of Sam.
Estate planning issues and Transfer ownership
Estate planning issues needs to jotted down at the very first instance, so that the certain portion
of wealth remains with the family even after the death of the owner. The estate can also be
devolved on the next generation or can also be sold to certain other people in lieu of a fair price.
So, based on the above-mentioned opinion it is suggested that the best plausible option for Fred
and Sally can opt for the Limited Liability Partnership which has a low-cost start-up and also that
the liability can be limited to the extent of the capital.
Yours Sincerely,
(Name of the User)
Attorney

References
BOOTH v. THE COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF
AUSTRALIA, (1987) 164 CLR 159 (HIGH COURT OF AUSTRALIA December 16,
1987).
Clarmoda Ltd v Zoomphase Limited, [2009] EWHC 2857 (Comm) (High Court November 13,
2009).
Wilkes v DePuy International Limited , [2016] EWHC 3096 (QB) (High Court, QBD December
6, 2016).