Evaluate the Organization’s Ethic Program

Business Ethics, Laws and Regulation Paper

Restaurant/bar: Lou and Jose plan to open a sports bar and restaurant where customers socialize and watch sporting events on large-screen TVs that hang around the bar. They do not have much money, but they do have Miriam, a wealthy investor who does not have time to participate in the business, but wants to provide capital to start the business in return for a percentage ownership.

A: Lou, Jose and Miriam can create either a corporation or partnership/LLC under which Miriam provides investment capital, while Lou and Jose provide personal effort. An operating agreement or purchase-option agreement could be created under which Lou and Jose's could each purchase a predetermined portion of the business at a predetermined cost. What cannot happen is an exchange of future effort for shares or capital contribution, because capital contributions must have present value. Miriam must be aware that any present transfer of her capital contributions to either Lou's or Jose's capital account or shares, could constitute a gift, and could subject Miriam to gift taxes. Or, the contributions could be viewed as taxable income to Lou and Jose, which would diminish their net investment value.

Professional practice: Akiva and Tara have just completed all educational and experiential requirements to be licensed as obstetricians. They want to open a birth clinic together. They will take out a large loan to finance start-up costs.

A: Akiva and Tara (A and T) could form a partnership and finance it with a personally-guaranteed loan, because the principal criterion for operation of a professional practice is that all owners possess the requisite government license. However, the proposed practice cannot be formed until each party actually receives their respective license. Otherwise, if either A or T do not pass their boards, then they could not be a partner in the practice.

Construction Scenario: Mei-Lin is the hiring manager for Surebuild,...