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Legal Questions: Shareholders and Business Owner Liability

Q1: Jerold Murphy and three others incorporated Country House, Inc. All four shareholders worked for the company. When the company had a surplus, it gave "bonuses" to the four individuals. Murphy initially contributed one-fourth of the capital to Country House, but he owned only one-ninth of the company at the time of the payments and was offered one-ninth of the surplus as his bonus. He claimed that he did one-fourth of the work and should receive one-fourth of the surplus as his bonus. Dis­cuss the magnitude of the bonus to which Murphy is entitled.

Q2: Alan Dershowitz, a law professor famous for his wealthy clients (O. J. Simpson, Claus von Bulow, Leona Helmsley), joined with other lawyers to open a kosher delicatessen, Maven's Court. Dershowitz met with greater success at the bar than in the kitchen—the deli failed after barely a year in business. One supplier sued for overdue bills. What form of business organization would have been the best choice for Maven's Court?

Solution Preview

1 -- Jerold and three others entered into an agreement to incorporate Country House. All four shareholders worked for the company. Jerold's initial contribution was one-fourth but he now owns one-ninth. He was therefore offered one-ninth, based upon his ownership. He claimed he did one-fourth of the work, which is the same amount as his initial contribution. He also claims that he is entitled to one-fourth of the total bonus.

- There are a few different elements that we need to consider in this scenario, and one of the problems is that our information is limited. We are not given information involving the most ...

Solution Summary

This solution discusses each of the two business law scenarios presented. The first discussion explains the amount of the surplus (profits) that Jerold is entitled to, based on the information provided. The second discussion explains the type of entity that would have been the best choice for Alan and his colleagues, when they set up the kosher delicatessen, Maven's Court.

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