Question

1. Edie, Alma, and Tim established a restaurant called EATs. Edie, a retired teacher, invested $20 000 in the venture, and Alma and Tim each invested $10 000. Edie, Alma, and Tim do not have a formal agreement concerning the allocation of responsibilities, but they each take turns doing the cooking. The serving and clean-up tasks are done by staff. One day, while Edie was doing the cooking, Juan got food poisoning from his meal.

1. Identify and explain the type of business arrangement Edie, Alma and Tim are in.

2. Juan intends to sue EATs, Edie, Alma, and Tim for damages of $100 000.

If Juan is successful, how will the damages be allocated among the parties?

Answer 1

A)The business arrangement is of limited liability partnership (LLP) is a partnership in which some or all partners (depending on the jurisdiction) have limited liabilities. It therefore can exhibit elements of partnerships and corporations. In an LLP, each partner is not responsible or liable for another partner's misconduct or negligence. This is an important difference from the traditional partnership under the UK Partnership Act 1890, in which each partner has joint (but not several) liability. In an LLP, some or all partners have a form of limited liability similar to that of the shareholders of a corporation. Unlike corporate shareholders, the partners have the right to manage the business directly.In contrast, corporate shareholders must elect a board of directors under the laws of various state charters.The board organizes itself (also under the laws of the various state charters) and hires corporate officers who then have as "corporate" individuals the legal responsibility to manage the corporation in the corporation's best interest. An LLP also contains a different level of tax liability from that of a corporation.

Limited liability partnerships are distinct from limited partnerships in some countries, which may allow all LLP partners to have limited liability, while a limited partnership may require at least one unlimited partner and allow others to assume the role of a passive and limited liability investor. As a result, in these countries, the LLP is more suited for businesses in which all investors wish to take an active role in management.

B)Juan intends to sue EATs, Edie, Alma, and Tim for damages of $100000.Juan willbe unsuccessful because in limited liability partnership  ,each partner is not responsible or liable for another partner's misconduct or negligence. So, Juan is not able to sue against Alma and Tim only Edie is liable to pay for the damage occur.