1. Many household services professionals such as carpenters, plumbers, and electricians do business as sole proprietors. If they make a promise to their customers that their work (not the products themselves) will be free from defects for a certain period of time (i.e., a warranty), and then subsequently sell their business assets to another individual, should the buyer be bound by the promises made by the seller? Why or why not?
2. Do modern professional firms such as law firms or accounting firms face the same problems as White & Case did in "Hyperlink: A Law Firm Partner Is Fired" ? Why or why not?
3. Kristoph incorporated Hi-Energy, Inc., which was a weight-loss program consisting of food products, diet pills, group meetings, and exercise classes. Hi-Energy, Inc. was a closely held corporation, and Kristoph was the sole shareholder, the only member of the Board of Directors, and the only corporate officer. Hi-Energy, Inc. charged $2, 400 for a six-month program. Kristoph frequently diverted Hi-Energy, Inc.'s revenue to his own personal checking account, rather than the corporation's bank account.
Kristoph used the money to pay for his personal living expenses, including his rent, groceries, and utilities. Even though state law required single-shareholder owned corporations to hold regular meetings. Kristoph did not think that he had to do this, so he did not hold meetings, keep minutes, or maintain the corporate records. Mary was a customer of Hi-Energy, Inc. She sustained a serious back injury during an exercise session at Hi-Energy, Inc., and she believed her injury was attributable to the negligence of the exercise instructor who worked for Hi-Energy. Inc.
She sued Hi-Energy, Inc. During discovery, Mary learned that Hi-Energy, Inc. had very few assets. In fact, it had debts that far exceeded its assets. She sought to pierce the corporate veil by naming Kristoph, in his personal capacity, on the complaint. Will Mary be successful in piercing the corporate veil? Why or why not?
4. Most small businesses in the United States are still run as sole proprietorships. Why do you think these businesses have not converted to the LLC form?
5. If you were a creditor, would you prefer to be a secured creditor or an unsecured creditor? What are the benefits and drawbacks of each?