Patty Newcome runs the successful “Taste of the Islands Caribbean Restaurant” which is well known in the Moose Jaw area. Patty started the restaurant as a sole proprietorship and still runs the business this way. With Patty’s strong business acumen and focus on serving quality food, the restaurant has thrived. Patty has extended the restaurant’s hours to keep up with the demand which means hiring lots of employees.

With all this success, Patty Newcome is now considering expanding the business by opening a second location.

1. Before expanding the business, should Patty reconsider the sole-proprietorship organizational structure of the restaurant? Why or why not?
2. Are there any legal benefits or shortcomings to finding another general partner or even a limited partner for this business?
3. Is there any other business organization that Patty should consider? What would be the legalpro’s and con’s of this third business structure?

Uh oh. The Taste of the Island Restaurant may be in serious trouble. While Patty was preoccupied with the expansion, Patty hired Michael to manage the day-to-day operations of the restaurant. Under Michael, less attention was made to keeping the kitchen running up to Patty’s high standards. Disaster struck when 40 people complained to the health authority that they became sick after eating at Taste of the Islands Caribbean Restaurant. It appears that the food may not have been cooked enough to kill off dangerous microorganisms, and as a result, people suffered food poisoning. The business is going to receive a large fine from the health authority. The business may also face civil litigation from those who became sick. Patty’s lawyer is worried that the restaurant is going to face over a million dollars in fines and legal claims.

What are the financial consequences for Patty, if:

1. the restaurant remains a sole proprietorship?
2. Patty has taken on board a limited partner?
3. Patty has taken on board a general partner? Include in your answer an explanation of how the legal doctrine, “joint and several liability” could apply.

Patty has registered the restaurant as a corporation?

Answer rating: 100% (QA)

1 Patty Newcome should definitely reconsider the soleproprietorship organizational structure of the restaurant The main reason for this is because if ... View the full answer