Bateson Corp. is considering entering into two contracts—one with a joint stock company that distributes home products east of the Mississippi River and the other with a business trust formed by a number of sole proprietors who are sellers of home products on the West Coast. Both contracts will require Bateson to make large capital outlays in order to supply the businesses with restaurant equipment. In both business organizations, at least two shareholders or beneficiaries are personally wealthy, but both organizations have limited financial resources.
The owner-managers of Bateson are not familiar with either form of business organization. Because each form resembles a corporation, they are concerned about potential limits on liability in the event that either business organization breaches the contract by failing to pay for the equipment. Discuss fully Bateson’s concern.