Ethics

Ethics

The best form of organization for Adam and Laura to start their pet grooming business name Dazzling Doggies Day Spa is a limited company. The limited company is suitable in the case of Adam and Laura.  The reason is that they have a potential source of Capital that is Laura’s mother who is willing to provide the starting capital for the business and become a shareholder but does not want to be involved in the daily activities of the business and does not want to have any personal liability in the business. To start with, a limited company protects any of the business owners from any personal liability in case the business collapses and has accumulated debt. The shareholders like Beth who is Laura’s mother as well as the other business owners can only lose their investment in the company but are shielded from losing their personal property as a result of losses in the company. In other words, the business entity in a company is separate from the owners and therefore if the company goes bankrupt only the company assets can be lost (Lewis, 2013). Forming a limited company will save all the shareholders the risks involved if Doggies Day Spa is started in the form of an ordinary partnership.

An ordinary partnership has unlimited liability and therefore is not suitable for Beth who does not want to have personal liability in the business. Beth does not want to be involved in the daily running of the business, and therefore a limited company is the best form of business for her. Doggies Day Spa as a limited company can appoint Adam and Laura to be running the business as the directors. Beth will be able to own the business as a shareholder and get her share of the profits but at the same time stay away from the daily running of the business.  According to Lewis (2013), in an ordinary partnership there is shared responsibility and therefore would prove inconvenient for Beth who does not want to be committed to the daily running of the company.

The actions of Adam using Dazzling Doggies Spa checking account to pay for his personal bills without the knowledge of Laura and Beth is unethical. Adam should consult with the other shareholders in the business whenever he wants to use the money for activities other than running the pet grooming business. The reason why it is unethical is that every business requires accountability and transparency (Ferrell & Fraedrich, 2015). Adam not only risks the business collapsing due to the wrong use of money in business but also risks the company suffering in future when it emerges that such money had not be accounted for when filing the taxes. The business might end up facing legal problems and lose money when they are accused of cheating on tax remittance. Adam is also going against the profit-sharing agreement because when people are jointly starting a business, they usually sit and agree on the profit sharing formula to avoid future disputes. Adam is, therefore, shortchanging the shareholders by getting more than his share and therefore his actions are unethical.

  References

Ferrell, O. C., & Fraedrich, J. (2015). Business ethics: Ethical decision making & cases. Nelson Education.

Lewis, W. A. (2013). Waiving Fiduciary Duties in Delaware Limited Partnerships and Limited Liability Companies. Fordham L. Rev.82, 1017.

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