G.H. Bass is a shoemaker that has been working as a sole proprietor for the past
ID: 2513731 • Letter: G
Question
G.H. Bass is a shoemaker that has been working as a sole proprietor for the past 2 years. Bass does not have any partners in the business. He has been selling his shoes online and takes special orders for clients. A very heavyset man by the name of Drissle James buys a pair of loafers from G.H.Bass sized 15 wide and feels very conformable walking in the shoes. Because of the extraordinary size of the shoes and the amount of materials needed to make the shoe, there were a few gaps made in its construction. As Drizzle was walking down the street, the shoe became unraveled and caused Drizzle to trip and fall into a ditch causing injury. Drizzle paid a good sum of money for the shoes and was severely disappointed in its construction. Drizzle sued Bass for negligence in the creation of the show and asked the court to give him compensatory damages for his injuries, suffering, and damages from his inability to work. ( Special damages). A jury granted Drizzle an award of $40,000 in compensatory damages plus attorneys fees. Bass only invested $10,000 into the business.
Remember, G.H. Bass is a sole proprietor and has no liability shield. He can only represent himself as an individual who makes shoes. Assuming options such as tax liability, limited liability shields, and ease of formation;
1. What kinds of business forms do you think that Bass should have formed in this scenario?
2. If G.H. Bass had a partner in the business, what kind of advantages would he had been able to have over a sole proprietorship?
3. If G.H. Bass had a partner in the business and formed an LLP, what kinds of advantages would he have been able to have over a general partnership?
Explanation / Answer
1. Bass would have formed a partner ship firm or LLP or Private Limited company for his business which would be more preferrable than proprietorship as liability arised in this scenario would be less in above given options.
2. If G.H. Bass had a partner in the business than the liability of $40000 would have been divided between him and his partner so the amount of loss would have been reduced but the liability would be paid in full irrespective of the capital of the partnership firm and share of partners.
3. If G.H Bass had a partner in a business and formed an LLP, then partner's liability for paying damages would have limited to the contribution of the partners which is not available in case of general partnership.
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