Business Organizations Activity

BusinessOrganizations Activity

BusinessOrganizations Activity

PartI

Thereexist so many business organizations the world over, offeringdifferent products and services to customers. The size, ownershipstructure, age and geographical networks of these firms vary.However, they all aim at making profits. This part of the essay willanalyze a business I intend to set up, Valid Delicacies.

ValidDelicacies will be a small restaurant business situated in theindustrial estate of my home county. The business will provide mealsto workers in this industrial estate. I have noted that employees inthese industries have a hard time accessing meals since mostrestaurants are located quite a considerable distance from theestate. The mission of Valid Delicacies is to become the restaurantof choice for delicious and healthy foods. The specific objectivesare to:

1. Offer tasty food to customers

2. Maintain high standards of hygiene in the preparation and consumption of food

3. Provide a variety of foods for customers to choose from

4. Offer excellent customer service

Iintend to organize this business as a sole proprietorship due to theflexibility this form of business accords me (Bento &amp White,2011). The capital outlay for this business is also relatively low,which I have plans of raising from my savings and disposal of a fewassets. A restaurant business requires close monitoring and fastdecision making, advantages which sole proprietorship presents. Iwant to have autonomy in my business. I understand that soleproprietorship also has disadvantages, among them being the thinknowledge base since it mainly relies on the proprietor’sexpertise. There is also the danger of the proprietor (myself)pinching from the business, thus inhibiting business operations andgrowth. However, I will be in close consultation with experts andhire competent staff to help in providing advice whenever needed. Iam self-disciplined, and I understand the destination that I want toreach. Hence, I will not draw from the business to leave itstruggling.

Inthe formation of my business, I must do proper site location. Thebusiness should be located in a place that is accessible to thetarget customers. Amenities such as electricity and drainage alsohave to be in place. I will have to obtain approvals from theauthorities and pay for operational and compliance licenses. This isto avoid future legal tussles. I intend to register this business asa limited liability company even though it will be a soleproprietorship. This will safeguard my personal assets againsteventualities of insolvency. The business will be a separate entityfrom me.

AlthoughValid Delicacies will be a sole proprietorship, it will outlive myinterests. I do not intend to wind the business up in the foreseeablefuture. However, if worse comes to worst, the proprietor will haveabsolute powers to dissolve the business by writing to the registrarof companies.

PartII

Thereare instances where shareholders have clashed with management orboard of directors of corporations. Legal suits have been filed, somenever concluded while some concluded at the first hearing. Thedirection the suit takes is dependent on the complaint and evidencepostulated by the plaintiff (Knepper et al., 2015). This section willevaluate the case between Frolic Inc. and two of its shareholders.

Enshrinedthe Delaware Corporations Law is the business judgment rule, adoctrine that safeguards decisions made by executives of corporations(Lafferty, Schmidt &amp Wolfe, 2011). The law states that directorsmake their decisions in utmost good faith, from an informed point andin the honest belief that the decision or step taken is in thecorporation`s best interests. Going by this rule, the directors ofFrolic have immunity from court interference unless there is proof ofconflict of interest. They can ride on this to defend themselvesagainst the suit by Clyde and Fresno. For Clyde and Fresno to win thecase, they have to prove that the Board of Directors breached atleast one of their fiduciary duty.

Intheir submission, Clyde and Fresno can claim that the Board ofDirectors breached their duty of care. They have an obligation tosafeguard the interests of shareholders, to whom they should be loyal(Lafferty, Schmidt &amp Wolfe, 2011). However, the Board ofDirectors had the backing of the majority of shareholders. Thedecision to move into family entertainment was presumed to be in thebest interests of the company and would maximize returns for theshareholders. The directors are sheltered from risks that arise fromtheir decisions. Hence, the chances of Clyde and Fresno winning thesuit are slim.

Notwithstandingthe legal framework, the fact that the company`s stocks have startedto plummet should provide enough evidence that the Board of Directorserred in their decision. Also, they were advised against the newbusiness direction beforehand. The two shareholders having warned theBoard of Directors should serve as a reason to compel the jury torule for Clyde and Fresno.

Inconclusion, business executives make decisions that may either resultin positive performance or lead the business into a downwarddirection. These executives should not be victimized for theirdecisions since risks are part of business. Legal frameworks such asthe business judgment rule exist to protect executives and directorsin such circumstances.

References

Bento,A. M., &amp White, L. F. (2011). Organizational form, performanceand information costs in small businesses. Journalof Applied Business Research (JABR),17(4).

Knepper,W. E., Bailey, D. A., Bowman, K. B., Eblin, R. L., &amp Lane, R. S.(2015). Dutyof Loyalty(Vol. 1). Liability of Corporate Officers and Directors.

Lafferty,W. M., Schmidt, L. A., &amp Wolfe Jr, D. J. (2011). BriefIntroduction to the Fiduciary Duties of Directors under DelawareLaw, A. Penn St. L. Rev., 116, 837.