Fact Pattern 1

Taylor has always loved cars. They have worked on their own cars over the years, including doing regular maintenance, doing certain modifications, and repairing them when needed. Taylor has a full-time job, but decides to start offering his services as a person knowledgeable in cars to his friends and family. Taylor starts to tell family and friends that he will provide maintenance, modification, and repair services to them for their cars. Some of Taylor's friends provide their cars to Taylor to do repairs in exchange for cash. Taylor does this work from the garage next to Taylor's house.

1. What form of business organization is Taylor carrying on, and what are its essential characteristics?
2. What are the potential benefits to Taylor in carrying on business using this type of business organization?
3. What are the potential downsides for Taylor in carrying on their business in this form of business organization?
4. What other form of business organization could Taylor consider in carrying out their business?
5. What could motivate Taylor to change the form of business they are carrying on into the one in question d. above?

Fact Pattern 2

Taylor's good friend Darcie is also a car enthusiast and begins helping Taylor with projects on Darcie's spare time. Darcie's friends and family also start bringing their cars to Taylor and Darcie to repair or modify. Things become so busy for Taylor and Darcie that they decide to leave their other jobs to focus on the car business. They agree to work together on the cars and to split any profits or losses 50/50. Taylor and Darcie put a sign outside of Taylor's garage that reads "Taylor and Darcie's Fine Automotive."

1. What form of business organization are Taylor and Darcie carrying on, and how is it formed?
2. What are the benefits for Taylor and Darcie in carrying on business using this type of business organization?
3. What are the potential risks for Taylor and Darcie in carrying on their business in this form of business organization?
4. What are the potential tax implications of carrying on business in the form that Taylor and Darcie are currently carrying on their business?

Fact Pattern 3

Taylor and Darcie's business has grown substantially. They decide to move the garage from Taylor's home. They find a garage owner that is willing to lease them a space to operate their business. The lease contains many terms that impose significant risk and liabilities on the business for events that occur at the premises. Taylor and Darcie hire a lawyer to help them reorganize their business to maximize their personal liability protection.

1. What form of business organization would the lawyer likely recommend Taylor and Darcie use to protect themselves from liabilities in operating their business, while allowing both Taylor and Darcie to remain engaged in the business' management?
2. Who has the authority to manage the affairs of the type of business organization that the lawyer would likely suggest in question a., and what are those persons' general duties?
3. What potential liabilities would Taylor and Darcie face as persons described in question b. above when managing the affairs of the business under this type of business organization?
4. What are the potential tax implications of carrying on business in the form that Taylor and Darcie will carry on their business after the reorganization?

Fact Pattern 4

Darcie and Taylor's business continues to be quite successful and profitable. Taylor has another idea for a business. Taylor wants to delve into professional racing. This new business will be quite risky, and Darcie does not wish to have liability for the racing company. Taylor is more interested and willing to take on the risk, but still wants Darcie to be involved as a "silent investor." Darcie and Taylor strike a deal where Darcie will be employed as the manager of the garage and receive a significant salary, and Darcie will invest in Taylor's racing business. The racing business will likely have losses and not profits for some time. Darcie and Taylor consult their lawyer and an accountant in order to determine the structure of the new racing business. They tell the lawyer that Darcie wishes to be protected from liability and will not be involved in managing the affairs of the racing business, and Taylor will manage the racing business and accept the liability. The accountant suggests that there may be a way for Darcie to use the losses of the racing business to offset the increased income from the garage, in order to reduce Darcie's tax burden.

1. What form of business organization would the lawyer and accountant likely recommend to Darcie and Taylor for the new racing business?
2. How is the type of business organization recommended in question a. above formed, and what are its legal characteristics?
3. If Darcie and Taylor both wanted to engage in participating in managing the racing business, but only wanted to take on liability for their own actions, while also being able to use any losses from the operations of the business to offset other income, and they were located in British Columbia or in another province in which (hypothetically) racing cars was a "qualifying profession," what form of business organization could they use? What is the difference between this form and the form recommended in question a. above?
4. In either type of business organization discussed in the questions of this fact pattern, what kind of agreement could Darcie and Taylor enter into with respect to the business organization in order to govern their relationship, and what are some of the general topics such agreements contain?