BLAW2003 assignment 2

BLAW 2003 SECOND ASSIGNMENT
DUE: A
typed, hard copy is due at the beginning of class on, November 28, 2014. Late papers will be penalized 2% per day and
will not be accepted after December 3..
Late papers may be submitted as a word document by email (.ca”>[email protected]) but if you would like comments, you
must give me a hard copy. I will
acknowledge receipt of emailed papers; please check for confirmation.
Weight: 15% of the final grade
This is an individual assignment. Please proof read carefully as marks will be
lost for poor spelling and/or grammar.
Be sure to set off all quotations within quotation marks and to provide footnotes. Remember that duplicate papers will both
fail.

Your friend Jennifer is excited to
start a new business which she is confident will be successful. However since she can only contribute $10 000
to the business, she needs her father’s (Robert) financial assistance for start
up costs. Her father is able to
contribute up to $50 000 but wants a number of safeguards. He wants to know that he will not lose more
than his investment, he wants a 5% return on his investment, he wants to take
an active role in management (since he does not trust Jennifer’s business
knowledge) and he does not want any liability for anything which might go wrong. He probably cannot achieve all of these
goals. Advise Robert of the consequences
of the following with regard to his stated goals:

1.
If
Robert and Jennifer enter into a partnership, to what extent can he achieve his
goals? Explain. (4 marks)
2.
How
could Robert become a limited partner? How would this affect his goals? What would be his legal rights and
obligations? (4 marks)
3.
If
the business were to incorporate in Ontario, what capital structure do you
recommend? (Hint: Robert and Jennifer are investing different amounts of
money). (10 marks)
4.
If
the business were to operate as a closely held business and Robert was a
shareholder, what are his legal rights and obligations? Which of his goals could he realistically
achieve? Explain. (2 marks)
5.
If
the business were to operate as a closely held business and Robert lent money
to the corporation what are his legal rights and obligations? Which of his goals could he realistically
achieve? Explain. (2 marks)
6.
If
the business were to operate as a closely held business and Robert was a shareholder
and a director, what are his legal rights and obligations? Your answer should
include a discussion of potential areas of director’s liability. Which of his goals could he realistically
achieve? Explain. (5 marks)
7.
Bearing
in mind all of Robert’s goals, how would you advise him to proceed? Why? You
should also consider the possibility that Jennifer owns the business as sole
proprietor and Robert gives her a loan. (3 marks)

Your answer must be
specific in providing clear advice to Robert.
Do not simply summarize the material in the textbook. Demonstrate your knowledge and understanding
by providing Robert with the information he needs for his specific situation.
Note that question 3 is worth 10 marks – this would suggest that a detailed
analysis is required.