Assignment task: In 2019, Maresa and Lance started a computer software business. Maresa prepared marketing materials and Lance made sales calls. During the first year, Lance sold 10 copies of certain of their software programs for $50,000 each. The business had a net profit of $480,000 and Maresa and Lance each received $240,000.
In January 2020, Maresa and Lance hired an attorney to incorporate their business under the name "Software Inc" a California corporation. The attorney properly prepared all necessary documents to incorporate the business but carelessly failed to file them with the California Secretary of State.
Lance continued to make sales calls to sell the software. He also sold a five-year service contract developed by Maresa. Due to brisk sales, Software Inc. projected income of about 8400.000 per year for the next five years from the service contracts alone. As a result in March 2020, Software Inc. obtained a $200,000 business line of credit and corporate credit card from National Bank secured by the accounts receivable for the service contracts.
Lance and Maresa used the line of credit to hire staff including you as COO, to purchase equipment and supplies needed by the company. Also to take advantage of the cash rewards program associated with the corporate credit card, they regularly used the corporate credit card to purchase gasoline for their cars; office supplies needed at the office; groceries for home as well as business and personal travel while taking steps to keep track of such expenses for tax purposes.
In July 2020, Lance had an automobile accident, caused solely by his own negligence, on the way to visit a prospective buyer. The accident gravely injured a pedestrian, causing long-term injuries. As a result of the accident, Lance had a breakdown and stopped working and company sales collapsed.
In August 2020, Software Inc. is reeling and considering ceasing operations having negligible assets and the delinquent loan to National Bank. As COO, you have been asked to prepare a memo discussing the following:
Problem 1: Is Software Inc. Maresa, and/or Lance liable to the pedestrian for the injury? Discuss.
Problem 2: Is Software Inc. Maresa, and/or Lance liable to National Bank for the loan? Discuss
Problem 3: Are there any other options available to the company to avoid a shutdown (ignore bankruptcy)?