Acme Fireworks Work-Related Decisions

Introduction
As the manager of Acme Fireworks, it is my responsibility to use the best business practices going forward. With business beginning to grow, the need to address certain issues is now incumbent and some decisions need to be made quickly before any further steps in the business are taken. Specifically, the company now employees 15 workers but with so many larger orders coming in currently from big firms, there is a need to hire and train more workers: however, if the orders begin to dwindle in the future, there could be a problem with funds to pay for these new hired hands. Thus, the questions that need to be answered first and foremost are whether the current contracts with the big businesses regarding the putting on of a fireworks display will be governed by common law or by the Uniform Commercial Code (UCC). It is also important to know whether I have formed an actual contract with the businesses and what the five essential elements of an enforceable contract are. Plus, the potential personal liability to Acme Fireworks should a spectator be injured from a stray firework needs to be discussed. I also need to know the different employment types and relationships relevant to agency law and what the advantages and disadvantages of each type are with relation to Acme Fireworks. Finally, I need to know why a sole proprietorship is a bad idea for this business. This paper will show, therefore, why our contracts should be governed by the UCC, what the five essential elements are, and why this business should be switched to a limited liability corporation (LLC).
UCC
Common law applies mainly to real estate transactions, services, insurance, employment issues, etc. UCC governs a contractual transaction where good and objects are transferred. In this case, a service is being provided—a fireworks display—but there are also goods involved—i.e., the fireworks themselves. Since this is not a real estate transaction or a service regarding insurance or employment, the UCC should govern these contracts. Rogers (2012) points out that “common law is primarily used in real estate and the law is made by the decisions of judges in individual cases” (p. 132). For this reason, the UCC contract basis is the best for this particular scenario, as it is more suited to the commercial needs of Acme Fireworks. With this in mind, the issue of whether the business actually entered into a contract with the businesses can be addressed.
Five Elements
A contract is made whenever two entities voluntary give their assent to an agreement about an exchange. The contract is based on the mutual and voluntary agreement made between the two parties and this contract is legally binding. As Rogers (2012) notes, there are five basic elements to a contract. These are:
1) Offer
2) Acceptance
3) Consideration
4) Legality
5) Capacity
First, an offer has to be made; second, the offer has to be accepted. In this case, Acme has made an offer to provide fireworks services to the businesses and the businesses have accepted the offer. Consideration refers to the thing of value that is exchanged and in this case, the businesses are paying money to Acme and Acme is providing the fireworks display, so—there is an offer, acceptance and consideration. Is there legality? If the agreement and specifics have been settled upon, and there is some evidence of the agreement, such as a bill of goods or an intent to pay, then there is a legal basis for the exchange having taken place and the contract is binding. There also has to be capacity, as in both parties must have the actual capacity to follow through on their part of the agreement. In each case, these points are evident and thus for Acme, these contracts have been entered into.
Personal Liability
If negligence is involved in the fireworks display, there is liability for Acme particularly because it is set up as a sole proprietorship and the manager is the owner and therefore the one to be held accountable (Smail, 1961). Ang, Lin and Tyler (1995) have also shown that personal liability is particularly an issue when a business is set up as a sole proprietorship—and so in the cases where even an accident can happen that is not the fault of negligence, it is important for an owner to protect himself. Even accidents can lead to lawsuits and the owner should not make himself vulnerable to prosecution. Coleman (2000) points this out as well, noting that “sole proprietorships and partnerships, on the other hand [from limited liability corporations], have unlimited liability, and their owners and partners are personally liable” (p. 40). As the owner of Acme Fireworks, I am currently personally liable to any unfortunate circumstances, and to protect myself I should look into changing the way this business is set up. I also need to examine the employment types and whether or not there is a type of employment I should use that is more beneficial than another.
Employment Types
The various types of employment and relationships relevant to agency law are: full-time and part-time work, casual employees, fixed term or contract employees, apprenticeship work, and commission or piece rate employees. Each bears a different relationship in terms of agency law. Full-time employees are hired for specific average number of hours, approximately 38 per week. Part-time employees work under 38 hours. Casual employees work on an irregular basis and do not maintain an expectation of regular or consistent work and are also under no obligation to take on work if it does come up. They do not receive sick leave pay like full-time employees and they do not have to give notice if they want to end their employment relationship. Contract employees enter into an agreement with the business to perform a specified work within a specified timeframe. They are typically entitled to the same types of sick leave payments as full-time workers. Apprentices are training towards certification and they typically enter into a contract with the trainer in the business. Commission employees earn their wages based on results. For the case of this business, it may be most helpful to establish casual employees, since it is unknown when or where there will be more work in the future.
Of course, there are disadvantages to hiring casual employees. For instance, they can refuse the work when it comes up and then the business may be short-handed. However, this risk is perceived to be less than hiring full-time employees and not being able to pay them because there is no work for them. Likewise, the risk of only hiring part-time employees is that there really is a need for work when it is available and so the part-time worker does not fit the bill either. The contract employee may be a good option as well, as it allows for specified work to be given when it comes up; so in many ways it is like having a casual employee who is bound by contract to do work—but it is still a matter of entering into the contract when the work comes up so in this sense it is not much different (Bernhard-Oettel, Sverke & De Witte, 2005). The best case for employing workers for Acme is to either do casual employees or contract employees and obtain helping hands when they are needed: the workers will still need to be trained, but that can be done prior to and Acme can keep these workers on file for when they are needed.
Why Sole Proprietorship is a Bad Idea
For Acme, a sole proprietorship is a bad idea because it puts too much risk on myself as the owner and manager of the company. As more business comes our way, the more our risk increases. So far we have been fortunate in that no accidents or injuries have occurred, but because the nature of this work is such that an accident could very easily occur, it is important that there not be any liability on my person if such does happen.
For that reason, I believe that I should change the nature of the company to an LLC. As Rogers (2012) points out, the LLC “represents an attempt to combine the best features of a partnership with the best features of a corporation” (p. 145). Additionally, the LLC also protects the owner from personal liability and so if an accident does occur, the owner will not personally be prosecuted.
Sole proprietorship is also a bad idea because it offers virtually no asset protection. If you are sued and lose the suit, you can lose all your assets. There is no separation between you and the business, and this separation should be there as a protection. That is why the business should have its own corporate legal identity. If it is just I doing the business, I am liable, and I need to reduce my liability because the business is growing and there is a high-level of risk involved in putting on fireworks displays for people.
Conclusion
In conclusion, Acme Fireworks is growing as a business, and as the owner and manager, I have a responsibility to make the best decisions about which way to guide the business into the future. However, because the nature of the work is spotty and I do not know when work will come, I have to make some decisions about the types of workers to hire, how to engage their services, how I should view contracts that I engage with other entities and how I should go about setting up my business legally speaking from here on out. First, I should view my contracts with other businesses when putting on fireworks displays as binding under UCC law. Second, I should view these contracts as binding whenever the five elements are in play: offer, acceptance, capacity, legality and consideration. Third, I must be mindful of my own personal liability in the company and how I can mitigate that risk. By changing the nature of the corporation to an LLC, I can limit my own personal liability and protect my own assets should an accident occur and the business be sued. I also need to consider how I will engage workers and the employment types that are available. While I already have 15 full-time employees, I may need more when work is busy, so I can hire more workers—but then if work slows down I have to lay them off. A better route may be to engage casual workers whom I can train, or to use contract workers who are already trained and hire them for just a specific event or duration of time.

References
Ang, J. S., Lin, J. W., & Tyler, F. (1995). Evidence on the lack of separation between
business and personal risks among small businesses. The Journal of Entrepreneurial Finance, 4(2), 197.
Bernhard-Oettel, C., Sverke, M., & De Witte, H. (2005). Comparing three alternative
types of employment with permanent full-time work: How do employment contract and perceived job conditions relate to health complaints?. Work & Stress, 19(4), 301-318.
Coleman, S. (2000). Access to capital and terms of credit: A comparison of men-and
women-owned small businesses. Journal of Small Business Management, 38(3), 37-46.
Rogers, S. (2012). Essentials of Business Law. San Diego, CA: Bridgepoint
Education, Inc.
Smail, L. (1961). Basis of liability in fireworks accidents. Washington and Lee Law
Review, 18(1), 144-150.