Business Entities, Laws, and Regulations

Business Entities, Laws, And Regulations Legal Cases Restaurant/bar: The structure of the arrangement between Lou, Jose, and Miriam suggests that a limited partnership would best suit their needs. "A limited partnership (LP) consists of two or more persons, with at least one general partner and one limited partner. While a general partner in an LP has unlimited personal liability, a limited partner's liability is limited to the amount of his or her investment in the company.

LP's are creatures of statute since they must file with the state to form them. Because of the limited liability of limited partnerships, they often are used as vehicles for raising capital. The limited partnership is a separate entity and files taxes as a separate entity" (Limited partnership, 2007, Quick MBA). From Miriam's point-of-view, this means that she does not need to worry about being personally liable for the debts of a risky venture such as a new restaurant. However, this does not ease Lou and Jose's concerns.

They have limited funds, and could lose everything if their sports bar fails. However, "LP's sometimes are set up so that the general partner is a corporation or an LLC" (Limited partnership, 2007, Quick MBA). The only downside is that corporations, as fictional persons under the law, are taxed twice.

But sometimes if "the limited partnership meets a minimum number of criteria related to limited liability, centralized management, duration, and transferability of ownership, it can enjoy the benefits of pass-through taxation; otherwise it will be taxed as a corporation" (Limited partnership, 2007, Quick MBA). Extermination business: Although a single proprietorship may be attractive to Frank, given the greater ease of opening such an enterprise, if the business should encounter financial difficulties, then Frank would be personally liable for his business' losses.

Frank desires to expand his business, and if it grows to be a large venture, Frank will require financial protection for his wealth. Incorporating the business and selling shares might be the best way to protect his assets: creating a privately-traded company would give Frank greater control over the operation. There is also the risk of liability due to litigation: if someone complains that they were injured because of the chemicals used, Frank could lose everything if he lost the case in court.

One way to avoid the additional financial penalties of double taxation as a corporation is to become an S Corporation. "S corporations are corporations that elect to pass corporate income, losses, deductions and credit through to their shareholders for federal tax purposes. Shareholders of S corporations report the flow-through of income and losses on their personal tax returns and are assessed tax at their individual income tax rates. This allows S corporations to avoid double taxation on the corporate income.

S corporations are responsible for tax on certain built-in gains and passive income" (S corporation, 2010, IRS). S corporations must be domestic in nature, issue only one kind of stock, and have less than a hundred shareholders: given that Frank only has aspirations to have a U.S.-based business, this entity type would seem ideal, although he might need some legal help to file as an S Corporation.

Professional practice: An LLC, or limited liability corporation, is the most popular type of entity structure for professional groups such as doctor's offices, accountants, and other small enterprises. As owners, Akiva and Tara would not be personally liable for the debts of the LLC, although constructing the entity is more complicated, legally, than a joint proprietorship. Given the insurance risks of running a birth clinic and the dangers of litigation, anything but an LLC would be unwise.

Additionally, in some states, owners are "protected from personally liability from certain acts or misconduct of other partners, employees, agents, or their representatives" in case there are allegations of misconduct (Limited liability, 2010, State of Iowa). Construction Scenario: Discriminating against an individual based upon the fact she is pregnant is a violation of federal civil rights laws, unless the individual is unable to perform the task in a way that would place an unreasonable hardship on the business (such as Surebuild's need for all employees to begin work immediately).

"The Pregnancy Discrimination Act amended Title VII of the Civil Rights Act of 1964. Discrimination on the basis of pregnancy, childbirth, or related medical conditions" is prohibited (EEOC, 2010). However, discriminating against Nick, because of his epilepsy, is not in violation of federal law, given the risks that would be suffered by other members on the crew. Discriminating against an individual because of a disability.