Background: The Largo Group (TLG)
After graduating with a B.S. in Management, you have been working for TLG for three years as an assistant consultant for Winnie James and Ralph Anders, senior consultants who serve clients in a variety of industries. Your work involves interviewing and meeting with clients, conducting research, writing office memorandums, making recommendations for clients, meeting with Winnie and Ralph with attorney-consultants, and coordinating and/or leading discussions for TLG’s in-house professional development seminars for its consultants.
Connor, Ali, Madison and Sam are all successful business owners who are friends or professional acquaintances in the business community. Connor has been the project manager for ten years for a construction company owned by a general contractor. Ali has been the Director of Marketing for a Mid-Atlantic-based carpet cleaning company with franchises on the East Coast. Madison owns a mid-sized, successful residential remodeling business. Sam owns a residential cleaning service business.
The four recently attended a Chamber of Commerce presentation about “green” businesses. This spurred their interest and they went to dinner following the Chamber event to discuss possible business opportunities. After several meetings, they decided to start a business together. The group decided that a commercial cleaning business would be a good fit for their professional experiences, skills, and interests. They agreed to pursue the possibility of launching a Maryland-based “green” commercial cleaning service business that they would like to name Clean-N-Shine (“Clean”). They are committed to operating the new business as an environmentally responsible company using only chemical-free cleaning products in the new business.
The four met several times with a business consultant to complete an analysis of market trends and demands in the cleaning industry and confirm whether Clean would likely be a viable business. The market analysis showed an increased demand and need for environmentally responsible cleaning businesses in the region. Consequently, the group decided to move forward with their idea to establish and market Clean as a green business.
The group plans to purchase cleaning supplies from Environmental Pro, Inc. (EPI), a mid-sized manufacturer incorporated in a nearby state, that produces chemical-free environmentally-friendly cleaning products. The four are familiar with the corporation as each has purchased EPI products for their respective current businesses. The four friends intend to resell certain EPI products directly to Clean clients. The Clean group plans to market and advertise their services and re-sell EPI products through print, television, radio media, and via internet sales.
Clean will be headquartered in a local shopping center. Clean headquarters will include private business management offices, a reception area, and conference meeting and planning space to which potential and existing customers will be invited to discuss proposals for cleaning jobs, cleaning products, and to complete contracts for sales and services. The business space also will be open to the public to collect information and inquire about Clean services, examine cleaning supply displays, and view photos and exhibits from ongoing and past commercial jobs.
The potential Cleaner owners recently attended a start up business seminar sponsored by the local chapter of the Small Business Administration. Following the seminar, the owners began to define the nature and scope of the work necessary to prepare a plan for the start-up business. They realize this process requires time, thoughtful analysis, and clear guidelines.
They also recognize the need for professional business consultants, such as TLG, to guide their start-up for Clean. Consequently, the four have hired TLG to advise and guide them through the start-up process for Clean.
Clean Owner Profiles:
He wants an initial 30%-40% interest in Clean but wants to limit his future capital commitment until he is certain the business is operating smoothly and profitably. He does, however, want the option to acquire others’ interests if they die or leave the business for any reason. He also wants to take out money from the business, in the form of salary, benefits, expenses, and/ dividends, as appropriate, as soon as Clean has a healthy net profit margin.
Connor is most concerned about liability, and although he trusts the other owners as “straight shooters” and successful business persons, he is uneasy about working with a group of investors with whom he has no previous business connections. He wants to limit his liability in the business to no more than his capital contribution, and prefers complete protection. If possible, he wants Key Man Insurance for the owners so all will have protection if one owner can no longer contribute to business for any reason.
Connor wants a managerial position so he can make decisions for day-to-day operations. He believes he is the best person to run the business as he currently owns a maid service and understands how to run a successful cleaning service business.
Ali wants a 25% interest and prefers to minimize additional investments to protect her cash assets needed for her other businesses. Her main goal is to realize a return on her investment as quickly as possible.
Ali wants to minimize her personal liability and protect her interests in the event of bankruptcy or death of any of the other owners.
Ail wants to participate in long-term business decisions, and in major decisions about spending and organizational commitments, but she does not want to be involved in day-to-day business activities. She favors hiring a general manager to run the business, preferably one with commercial cleaning experience.
Madison initially wants to invest up to 40% and is willing to invest another 5% because she knows start-up businesses often need more capital. She favors a larger, rather than a smaller, stake in the business. She wants to take out as much money as possible from the business, as soon as financially possible.
Madison wants to minimize personal liability, as well as liability for the business. She realizes the future of the business is uncertain and she wants maximum protection again all pitfalls.
Madison is willing to be involved in day-to-day business operations and has the time to do so because her other business is running smoothly with competent managers. She wants to play a key role, along with the other owners, in establishing the structure, business environment, and culture for Clean. However, she believes that a skilled general manager with commercial cleaning experience would be optimal for the business.
Sam is willing to commit to an investment of 51% interest in Clean, but is agreeable to a lesser interest.
Sam wants to minimize his personal liability and prefers to limit it to his capital investment but is willing to negotiate.
With a maximum interest of 51%, Sam wants complete control over business operations; even with a lesser interest, he wants a strong managerial position. Sam wants all owners with a minority interest to be silent in day-to-day management of Clean.
This project relates to the following course outcomes:
- recommend appropriate actions in the business environment based on an understanding of sources of law, substantive legal concepts, legal process and procedure, and available remedies
- analyze contractual rights, obligations, liabilities, and remedies in the business environment
- analyze tort rights, obligations, liabilities, and remedies in the business environment
Background: The Clean-N-Shine (“Clean”) owners are meeting with TLG in final consultations before Clean opens business operations. The purpose of these final meetings is to identify the:
- areas of business law presenting the greatest potential risk and liabilities for Clean; and
- areas of business operations vulnerable to potential risks and liabilities for which Clean should seek legal counsel.
Winnie and Ralph have asked you to provide a report that presents your reflections and recommendations based on your research and analysis during the past seven weeks of TLG’s consultation with the Clean owners.
The report will have two (2) parts.
Part I. Risks and Liabilities
A. Analyze and discuss two (2) areas of business law that present the greatest potential risks and liabilities for the Clean business, from among these areas:
- Negligence related to any business operations
- Negligence related specifically to premises liability
- Strict product liability related to the use of EPI products for Clean services
- Strict product liability related specifically to the resale of EPI products
- Contracts with employees
- Contracts for the sale of goods with clients
- Agency law and contracts with any Clean agents
For EACH of the two (2) areas of the law selected from the above list, you must:
(1). Provide a background explanation of the area of law, e.g., negligence, contracts for the sale of goods, etc. (be detailed and specific so any reader can understand the meaning of the specific area of law)
(2). Analyze and explain the specific potential risks and liabilities presented by the area of law and why and how each area of law creates vulnerability for Clean
(3). Provide a specific example of why and how the potential risks and liabilities could arise for each area of law for the Clean business
Minimum of 3 paragraphs for EACH of the two areas of risks and liabilities you choose to discuss (total of 6 paragraphs, minimum)
Citations required : Remember to use in-text citations in the narrative for all reference work and full citations on a separate Resources page.
Part II. Legal Counsel
During the past eight weeks, we have discussed and emphasized the importance of the Clean owners seeking business advice from TLG and the importance of Clean – and every business – seeking legal counsel from an attorney for various aspects of business operations.
In Part II, you are to reflect on your experience in consulting with the Clean owners, your research and analysis, and make the following recommendations.
A. Evaluate and explain why you recommend that the Clean owners seek legal counsel with an attorney for any – or all – aspects of its business operations, i.e., contract writing, procedures to protect against negligence risks, recruitment policies, etc.
- Explain and support the rationale for your recommendation specifically, in detail and comprehensively, using examples, personal experience(s), etc.
- Consider specific areas of business operations for which it is particularly important to seek legal counsel
Note: There is no single correct answer; the detailed, specific rationale and support for your recommendation is most important.
It is not necessary to cite resources in Part II for your personal opinion, but you must include a citation each time you do use information from a specific resource (i.e., from assigned course materials) to support your conclusions.
Minimum of 3 paragraphs
TO: Winnie James, Ralph Anders
FROM: (your name)
RE: Clean risks and liabilities
Part I. Risks and Liabilities
A. Business risk #1
A. Business risk #2
Part II. Legal Counsel
Tips for Formatting and Structuring Analysis:
- Write in complete sentences in paragraph format.
- Use in-text citations citing to relevant assignment materials.
- Double-space; 12-point Arial or Times Roman font.
- Introductory Sentence: Begin with an introductory sentence or very brief paragraph that states your conclusion to the questions asked.
- Concluding Sentence: End the discussion with a concluding sentence or a very brief paragraph that summarizes your conclusion/what you discussed.
- Support Arguments and Positions: Please refer to the module in Content, “How to Support Arguments and Positions”.
Review the Project Memorandum
Thoroughly read the project to ensure all required elements are present.
Review the grading rubric to ensure that you gain the most points possible for this assignment.
Proofread for spelling and grammatical issues.
Use the spell and grammar check in Word.