Question

Danielle decides she is going to open a bakery. She talks to Sarah and Staci about going into business with her. They agree. They find the perfect space to rent and start their business, “Three Girls Bakery.” About a year later the three of them decide to have a meeting to discuss the business. Danielle does not agree with the direction that Sarah and Staci want the business to go in. She gets upset and starts to walk out of the meeting. “I’m the one who wanted to open this bakery to begin with!” she shouts. “Now you guys want to start using lower quality ingredients so you can put more money in your pockets?!!! she yells. Danielle stomps towards the front door, "I guess I'm out voted so go ahead and order the crappy ingredients!" she yells as she walks out and slams the door.

About a month later, Dorothy, an 85 year old woman, is enjoying a muffin and coffee at a table in their bakery. "I don't feel good," she says. "My stomach really hurts." A few minutes later she throws up and falls to the floor holding her stomach. Danielle runs over to her. She is unconscious. Danielle calls 911. Later Danielle finds out that she had E. coli food poisoning that they are linking to the muffin she ate at their bakery.

Three Girls Bakery is now being sued by Dorothy's attorney. She is asking for $1.2 Million in damages. The attorney serves Danielle, Staci, and Sarah with a subpoena to appear in court to disclose all their business assets and personal assets. "Personal assets?!! What?!!" Staci says frantically. "They can't take my home can they? What about my car? And my savings account? What's going on?!!!" Staci says as tears run down her cheeks.

Please state:

What should Danielle, Sarah, and Staci have done when forming their business that would have prevented Dorothy from trying to get their personal assets?

What should Danielle have done when forming the business to make sure she could have left the business when she didn't agree with Sarah and Staci's business decisions?

(Please use the IRAC Law Method)

Answer 1

What should Danielle, Sarah, and Staci have done when forming their business that would have prevented Dorothy from trying to get their personal assets?

Any restaurant, bakery or fmcg business is associated with very high risk factors. Although every owner probably takes a lot of precautions to ensure your restaurant or bakery is safe and obeys the law, but there is always a chance that an accident or oversight could leave you facing a lawsuit.

RISK FACTORS

Labor suits of employees

Patrons can sue you if your food makes them sick

Customer with allergies becomes ill due to wrong ingredients

Someone gets injured at your restaurant

Every business owner must be fully knowledgable to the above factors .

The answer to this question is Danielle, Sarah and Stacy should have gone for Liability Insurance in the begining of the business.

What is Liability Insurance?

Liability insurance provides the insured party with protection against claims resulting from injuries and damage to people or property. Liability insurance cover both legal costs and any payout for which the insured party would be legally responsible if found legally liable.

To protect the assets they must go for UMBRELLA INSURANCE which is a type of liability insurance. It may cost on the higher side but every owner must be fully aware of the consequences of not having such kind of insurance in tough times.

What will it cover?

- Coverage against such threats, dangers and unforeseen circumstances which are not covered under any standard insurance policy.

- The insurance company will provide you with an attorney who will defend you against the lawsuit.

- Coverage of full investigation expenses.

- Helps in making a settlement

Its also a very quick and hassle free process, you just need all the documents.

What is IRAC?

It functions as a mehedology for legal analysis. I.R.A.C stands for ISSUE, RULE, APPLICATION AND CONCLUSION.

In the given case:-

Issue- What should Danielle have done when forming the business to make sure she could have left the business when she didn't agree with Sarah and Stacy's decison making?

Rule- All the business partners can talk within themselves and take a mutual decision or can consult an accountant and attorney to make a agreement of ending a partnership or involve a third party for clearance on the issue (mediation or arbitration) and sign a legal document binding them to the decision of the impartial third party.

Application- Danielle should have signed a legal document for leaving the partnership and can take her share safely and lawfully.

Conclusion- According to this case if Danielle is involved even after the conflict among three, which means no legal work is done among three in terms of anything, which makes her equally responsible for the damage done.

Hope, that solves the question. Do comment for queries.