Question

Ethan founded and operated a lunch-only catering business, which specialized in providing fresh, delectable, eat-at-your-desk lunches to office workers. When he died, the business was dissolved because there was no plan for succession (control) in the event of his death. This is an example of:

Answer 1

Ethan's sole proprietorship lacked a succession plan when he passed away, resulting in the dissolution of his business due to state intestacy laws. This emphasizes the importance of estate and succession planning for business owners to ensure business continuity.

Step-by-step explanation:

Ethan’s situation with his catering business is an example of the consequences of not having a succession plan in place, particularly in the context of a sole proprietorship. Sole proprietorships are businesses owned by one person where there is no legal distinction between the owner and the business. As a result, when the owner passes away without a will, trust, or succession plan for the business, the state determines the fate of the business assets according to intestacy laws. Unfortunately, in Ethan's case, this led to the dissolution of his business because the law did not provide a mechanism for the business to continue operating after his death.

It's essential for business owners, especially sole proprietors, to plan for their business's future in the event of their incapacity or death. Without proper estate planning or a succession plan, the business may face an uncertain future or dissolution, as seen with Ethan's catering service. If a plan had been in place, it could have allowed for the transfer of management or ownership, potentially keeping the business alive.

Answer 2

Sole Proprietorship.

Step-by-step explanation:

This is an example of a Sole Proprietorship. It is a form of business owned by one person . The owner provides the capital (usually not that large) , has unlimited liability in the business, and the life of the business depends on the existence of the owner; if he falls ill or passes away and there's no succession plan, the business would dissolve.