Question

For over five years, Rick was the CEO of JB Guitars Inc., a corporation operating a chain of retail guitar stores. He had gained tremendous practical experience and decided to start his own business selling guitars. When he first started working at JB Guitars, Rick agreed not to carry on a competing business for two years after he ended his employment with the corporation. To avoid breaching that contract, Rick incorporated a corporation named Generation X Guitars Inc. to carry on the business. He is the sole shareholder, director and president. JB Guitars claims that the new corporation is just a way of getting around the non-competiiton agreement and has sued for a cour order prohibiting Generation X Guitars from carrying on a business competing with JB Guitars. Will JB Guitars be successful?

Answer 1

Introduction-

Sole Proprietorship business- refers to the type of business in which a single individual is solely responsible for the overall activity of the business which he initiated to carry out. In this sole proprietorship the person itself is entiltled for all income, expenses, risk bearing, assests and liability of the business etc The sole proprietor cannot be an employee of the company but can hire other person to work for it as an employee of the the company, in case of any fault he is solely liable.

Here in the above mentioned case the JB corporation (guitar company) for which Rick was working as a CEO and has agreed on his service on the terms not to carry on any competing business for two years after he ended his employment with JB Corporation But after gaining much of its experience he initiated with its sole proprietor business under the name Generation X guitar which also deals in the guitar as a product, for which J B corporation has sued Generation X guitar from prohibiting to carry on a competing business. In this case JB corporation will be successful as Rick has failed to comply with his agreed terms and has initated a sole proprietory business competing JB business and being the sole proprietor he himself is responsible for all risk and liability and in the given case also he can be sued by JB corporation for carrying on a competing business within two year of the end the service with the JB corporation.