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Business Law/IP Innovation and entrepreneurship Essay Example

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1. In what situation, if any, would a smart entrepreneur decide to start a partnership instead of the other possible business forms?

Smart entrepreneurs will partner up with other entrepreneurs because of certain situations. To begin with, partnership with a mature entrepreneur enhances good business decisions compared to young entrepreneurs. A smart entrepreneur will focus on the ability to be possessed by different partners like skills or possession of capital. At the beginning the partner having good business skills will contribute the services in the partnership whereas the other partners raising the required capital. A partnership will be beneficial because of the sharing of tax returns, profits and losses thus helping one another in case one partner fails. Other types of businesses contain various regulations and unlimited liabilities (Dauchy, 2011, p. 32).

2. In which type of business entity or entities can venture capital funds typically not invest (e.g. LLC, partnership, and corporation)? Why?

The Venture Capital does not invest in Limited Liability Corporations because they are always certain of what they are expecting and have clear preferences on the structure of their transactions. In most cases they prefer having their investments in “C” Corporations, which is, form driven and this is because, if the wrong entity is formed and at the same time it is in the wrong state, the Venture capital process inexperience and ignorance will not be expressed. In addition, not all the entrepreneurs will want to express the two aspects as they express their entrepreneurial savvy to the investors who are potential (Dauchy, 2011).

3. How can employers fire/terminate employees in the United States?

While the employer well understands the will policy employment can fire an employee any time so long as there is a reason for the termination. To avoid problems, when firing an employee should observe the agreements they made with them. The employers should be careful when firing their employees despite the fact that they have total mandate for doing that hence employees cannot be fired for some things such as medical leave, issues based on religion, gender, age, race etc., complains on their rights such as safety and health. They can also fire them when they are sure about the issues on their performance (Dauchy, 2011, p. 52).

4. In what two situations (“liquidity events”) do venture capitalists typically stand to make the most money?

When shares are being distributed to a liquidating trust whereby, the equity in the company where Venture Capitalist is investing in changes occur in terms of ownership whereby another entity is generally going to exist up to the moment the shares held by the Venture Capitalist become liquid after sales are done. The other situation is when shares are distributed to the LPs. In this situation new shareholders are picked up in the company Venture Capitalist is investing in and he don’t want the shareholders who are new and in this situation is likely to get some advantages after the distributions (Dauchy, 2011, p. 64).

5. Under what circumstances will a plaintiff shareholder be most likely to be able to “pierce the corporate veil”?

  • In case of any illegal act that is done against one of the shareholders and the organization has failed to correct this act.

  • When an organization keeps its assets beyond the reach of the shareholders, hence it is their right to have and decide on the assets.

  • When the company in which he/she has shares is unable get the shares and sale them and it’s their right to do so by following the regulation of the organization.

  • When there arises some disagreements among the shareholders and they are unable to solve the problem that is prevailing between them and the company manager (Dauchy, 2011, p. 75).

6. When is structural anti-dilution protection triggered and why is it entirely fair for a potential warrant holder to ask for it?

Structural anti-dilution protection is triggered when an adjustment of conversion price of the preferred stock in the common stock during the occurrence of any combinations or subdivisions of stock dividends, common stock and other reclassifications, reorganizations, distributions or similar events concerning the common stock (Dauchy, 2011, p. 25).

It’s extremely fair for a potential warrant holder to ask for it in cases of stock split where this holder expects an effected provision when subdivided common stock by stock is split into huge numbers of common stock shares, then with effect, conversion price of every preferred stock series will concomitantly with the effective subdivision decrease proportionally (Dauchy, 2011).

7. Who holds the burden of proof in a duty of care case and in a duty of loyalty case?

Duty of care is part of the negligence tort. The burden of proof is entitled through the negligence law to be provided by the person who has suffered injuries due to another person’s negligence. The injured person should be compensated because of the damage or loss, which has, arose due to the negligent omission or act.

Duty of loyalty deals with the undivided loyalty the employee has with the employer as per the employment relationship. The employer is holds the proof burden by claiming the breach of duty of loyalty in cases of misappropriation of trade secrets, business opportunities and property (Dauchy, 2011, p. 45).

8. Explain how the “corporate opportunity doctrine” applies to partners in a partnership. Give an example.

Corporate Opportunity Doctrine will apply to partners within a partnership. Partners in their official capacity might not develop opportunities with corporate resources, obtain interests adverse to the partnership or obtain property reasonably incident to prospective or present business of the partnership; or in cases where the partnership has a current tangible expectancy interest or current interest; or concerning the partnership existence, unless the opportunity is initially presented to the partnership which then decides not to pursue the opportunity. For example, a Doctrine will not permit an officer or director to personally make profit by obtaining property since the Corporation intends or needs to obtain its property as per its formation (Dauchy, 2011, p. 63).

9. In what situation is a court most likely to enforce a five-year covenant not to compete?

When employees quit and eventually form competing businesses, the court is most likely to enforce a five-year covenant not to compete depending on time and geography. The courts will use this covenant depending on the business nature within a period of five years. The courts sets a reasonable radius for retail businesses to be 15 to 25 miles, whereas the reasonable radius for companies doing business on a national or state scale to be around 200 to 350 miles in addition to the employer home state boundaries. The courts will also enforce this covenant in an aim to protect the party’s goodwill hence balancing against potential employee hardship (Dauchy, 2011, p. 87).

10. How does a company ensure that their trade secrets will be legally protected?

The company’s trade secrets will be legally protected when the following measures are followed:-

  • Making its information confidential: Those who are unaware of the company’s status and information will realize that it is confidential and must be kept secret rather than using a copyright notice.

  • Nondisclosure agreements: parties are entitled to signing to this agreement thus restricting him or her to keeping information confidential. This makes a trade secret misappropriation case easy.

  • Distribution restriction: companies should ensure that information on its trade secrets is disseminated to the people really in need of it and not each individual. Copy restrictions may be used for papered or electronic documents (Dauchy, 2011, p. 75).


Dauchy, C. B. &. C., 2011. The Entrepreneurs Guide to Business Law. 4th ed. ed. UK: Cengage Learning.