Case 4: Chavers . Epsco, Ine., 352 Ark. 65 (Ark. Sup. Ct. 2003) (Cross 8h Ed. p.

Question

Case 4: Chavers . Epsco, Ine., 352 Ark. 65 (Ark. Sup. Ct. 2003) (Cross 8h Ed. p. 391). Gary Chavers operated Chavers Welding and Construction "CWC"), a construction and welding business, in Jonesboro. Gary's sons Reggie Chavers and Mark Chavers joined the sons Reggie Chavers and Mark Chavers joined their father in the business after graduating from high school. Gary, Mark, and Reggie maintain that CWC was a sole proprietorship owned by Gary, and that Reggie and Mark served only as CWC employees not as CWC partners. In February 1999, cWC entered into an agreement with Epsco, Inc. Epsco"), a staffing service, to provide payroll and employee services for CWC. Initially, Epsco collected payments for its services on a weekly basis, but later Epsco extended credit to CWC. Melton Clegg, , President of Epsco, stated that his decision to extend credit to CWC was based, in part, on his belief that CWC was a partnership. CWC's account with Epsco became delinquent, and Epsco filed a complaint against Gary Reggie, and Mark, individually, and doing business as CWC, to recover payment for the past due account. Gary discharged a portion of his obligation to Epsco due to his filing for bankruptey Epsco sought to recover CWC's remaining debt from Reggie and Mark. After a hearing on March 7, 2002, the trial court issued a letter opinion, finding that Reggie and Mark "represented themselves to [Epsco] as partners in an existing partnership and operated in such a fashion to give creditors in general, and Epsco in particular, the impression that such creditors/potential creditors were doing business with a partnership... On May 21, 2002, the trial court entered an order stating that Reggie and Mark were partners by estoppel as relates to Epsco. The trial court found that Reggie and Mark were jointly and severally liable for the debt of CWC in the amount of $80,360.92. In addition, the trial court awarded Epsco pre-judgment interest at the rate of six percent, post-judgment interest at the rate of ten percent, and attorney's fees in the amount of S8,036.92. 1. Gary, Reggie and Mark Chavers have formed a partnership if there is credible evidence showing they jointly own the assets used in the construction and welding business 2. Reggie and Mark could have avoided liability for the debt due to Epsco if theitr LC or LLP, and the business were conducted in the form of a corporation, L contract to provide staffing, payroll and employee services was between Epsco and the business entity 3. If the welding business conducted by Gary, Reggie and Mark Chavers was a 4. As sole owners of the construction and welding business, Gary, Reggie and Mark 5. Gary, Reggie and Mark should transfer their welding business to a LLC to avoid partnership, then Gary Chavers cannot be found liable to Epsco for the staffing payroll and employee services by virtue of his status as sole proprietor Chavers can avoid double taxation of income if the business is conducted as a sol proprietorship, partnership LLC, or LLP, but not if it conducted in a corporation personal liability for business debts and to avoid the more onerous governance documentation requirements of a corporation.

Explanation / Answer

1. FALSE, in case of partnership by Estoppel, there is no need of credible evidence to the joint ownership of assets. However in a partnership, the ownership of the assets is held jointly and not personally by the partners.

2. TRUE. if the business was conducted in the form of a corporation, then personal liability could have been avoided.

3. FALSE. Gary is equally liable as a partner.

4. TRUE. double taxation can be avoided in proprietorship or partnership, as proprietorship or partnership does not pay tax by itself. Profits or loss pass through to the partners, who are liable to pay income tax on their proportionate share of income.

5. FALSE . before transferring the partnership to LLC, partnership have to be dissovled and all the assets and liabilities have to be distributed to the partners . All the partners then contribute the assets and liabilities to LLC.so personal liabilities have to be discharged anyway before transferring the business to LLC .

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.