Business Debts Agreement Cases and Considering Sole Proprietorship

Business Law Briefing Paper
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Briefing Paper 1: Critical Legal Thinking
What is the liability of an LLC for its debt? What is the liability of a member-owner of an LLC for the LLC debts? Explain.
An LLC is similar to a Corporation where the owners are protected from personal liability for any business debts taken under the LLC. The profits and losses accrued from the business transaction of the corporation are passed down to the owners of the LLC who pay through their personal tax file returns though they do not take personal liability if the LLC fails to pay its creditors (Sims, 2003). Therefore, the creditors cannot go after the assets of the owners of the LLC because the assets of the LLC are the ones supposed to pay off the debt.
Though the owners of the LLC are cushioned against personal liability for any business debts or claims, there are instances where the owners can be held liable. These include when the owner(s):
Injures a person at individual capacity
Offers to guarantee a business debt which the LLC fails to clear off
Defaults to deposit taxes deducted from the employees’ wages
Involves himself/herself in fraudulent business deals which damages the company’s image
Did Hess owe an ethical duty to pay the debt owed by 1138 LLC to Siva? Did Siva act ethically by suing Hess personally to recover the debt owed by the 1138 LLC?
Hess did not owe any ethical duty to pay the debt owed by 1138 LLC to Siva because he did not personally offer himself to guarantee the loan taken by the 11383 LLC. Siva did not act ethically by suing Hess to recover the debt because even according to the lease agreements, 1138 is a separate legal entity and not an extension of Hess personal affairs (Ferraro, 2010).
What should Siva have done if he wanted Hess to be personally liable on the lease? Explain.
If Siva wanted Hess to be personally liable on the lease, she should have included a clause for personal guarantee to the lease taken. This would mean that besides the company being liable to the lease, the members are still liable, but the last option if the company defaults the lease.
Briefing Paper 2: Law Case with Answers
Did Soskin’s signature on the contract constitute a personal guarantee for the payment of the debt of Nashville Pro Hockey, LLC, to CRM and thereby make Soskin personally liable to CRM for the debt?
According to the contract agreement, the signature appended in the agreement offers a second guarantor to the debt; the first guarantor is the LLC itself and it is the first one to be sued for the CRM credit. The structuring of the contract agreement also makes the Signatory liable to the debt. The use of the singular preposition ‘I’ instead of ‘Nashville Pro Hockey’ makes the signatory liable. To avoid such instances, the contract agreement should be structured to depict the company as the one contracting the services, not the signatory (Ferraro, 2010)
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Briefing Paper 3: Critical Legal Thinking Cases
Considering Liability to Franchisor
This case is applicable to the Franchise business in the US. McDonald’s Company ha...