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Week 4 · Assignment: Traditional alternative (no AI)

Week 4 — Who Is on the Hook? Two Siblings Choose a Legal Form — Traditional alternative (no AI)

Introduction to Business Free sample edition
Traditional alternative (no AI), unpublished. In the course this is a separate assignment that ships unpublished beside the adaptive assignment: same objective, no AI. An instructor who prefers it publishes it and unpublishes or deletes the adaptive one, as the note at its top says.

Instructors: publish this instead of the adaptive version if you prefer, and unpublish or delete the adaptive one.

Assignment 4 of the term — compare two legal forms for a small business, compute what each owner could lose, and explain the choice to someone new to business.

This week you learned how the legal form of a business decides who owns it and whose savings stand behind its debts: the sole proprietorship, the general partnership, the corporation, the LLC, and franchising. In this assignment you compare two forms for one small business, compute what its owners could lose in the worst case, and explain the choice to someone who has never studied business. This week's lecture tutorial, quiz, discussion, and Business Case Workshop practise the same ideas from other angles.

The task

The case is illustrative, built for this course and not real data. Two siblings plan a home-cleaning service that sends a two-person crew to apartments and small offices in a van. Like the coffee cart this course follows, the service is a business: it aims to take in more money than it spends.

The siblings' money and debt, line by line:

  • Sibling A's savings put into the business: 6,000 dollars.
  • Sibling B's savings put into the business: 4,000 dollars.
  • A loan for the van and cleaning equipment: 14,000 dollars.

They are choosing between two forms: a general partnership, which needs no filing, and a two-member LLC, created under state law. For both problems, assume the worst case: the business fails and nothing from it goes toward repaying the loan.

Work these two problems, showing every addition:

  1. As a general partnership, the lender collects the whole loan from Sibling B. How many dollars is Sibling B's worst-case personal exposure?
  2. As a general partnership, how many dollars could the two siblings together lose personally in the worst case?

Beside each answer, add a brief interpretation:

  • Problem 1: explain, using the term unlimited liability, why Sibling B answers personally for the whole loan and not only half of it, and name two things the siblings' partnership agreement should settle, including how they would settle up with each other after the lender collects.
  • Problem 2: compute what the two siblings together could lose as a two-member LLC and say why the loan drops out, explain why limited liability does not mean the siblings cannot lose money, and say whether buying a cleaning franchise instead would make the siblings owners of the brand, with a reason.

Explain it to a non-expert

The siblings' parent asks you, "If they form an LLC, does that mean they can't lose anything?" Write a 3–5 sentence message that explains what each form puts at risk, what an LLC protects and what it does not, and one limit, including that this case is illustrative and that a real family would take the question to a lawyer or the state's business office. Explain any technical term in everyday words. More than one good answer is possible, and the message gives no legal, tax, or financial advice.

For a different, ungraded example, imagine a one-person tutoring service that borrowed for a laptop. Model answer: "Right now the tutor runs the business alone without filing anything, so if it failed, the lender could ask the tutor to repay the laptop loan from personal savings. Forming an LLC would make the business its own legal person, so that loan would belong to the business. The tutor could still lose the money already put in; the LLC caps the loss, it doesn't erase it. This is a made-up example, and a real tutor would check the details with a lawyer or the state."

Use that pattern for the cleaning service, with your own wording and evidence.

Show your work. A reader should be able to rebuild every amount you report from the siblings' money and debt without guessing which lines you used.

Deliverables

Submit a single report containing:

  • the two answers, each with every addition shown and the interpretation the task names for that problem;
  • your message to the parent, explaining what each form puts at risk, what an LLC protects and what it does not, and one limit; and
  • a side-by-side comparison of the general partnership and the two-member LLC, listing what the siblings could lose under each, so your amounts can be checked.

Keep it to roughly one page. Clear and correct beats long.

Choose how you show it. Present your report as written text, or as a recorded audio or video explanation of about three minutes with a transcript, or as a labelled sketch of the two forms side by side with a short note. Every form is graded by the same scoring criteria. Submit in any accessible file type or as a link; a recorded response may be submitted as audio or video with a transcript, or as text.

How you'll be graded

The full analytic rubric is attached to this assignment in Canvas.

Academic integrity and AI use

This version is designed to be completed without AI: do the arithmetic, the interpretations, and the writing yourself, without a chatbot or other AI tool. You may use a free spreadsheet to lay out the siblings' money and debt. Submitting AI-generated work as your own, or copying another student's work, is an integrity violation under the course policy.

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