Business entities laws and regulations

Business Entities, Laws and Regulations

Running a business is a challenging process, with many financial and legal frameworks to follow. Whether it is starting a corporation, hiring workers, or incorporating a small business, managers and owners need to carefully follow the rules and regulations that guide corporate practices. This paper will explain some of those practices through three scenarios: Frank, a movie star who wants a business named after his most-famous character; Irene, a hiring manager working for Frank's business; and Paul, a sole proprietorship owner looking to incorporate.

Because Frank knows nothing about the construction industry and only wants to further his fame and acting career, he needs to ensure that the business he invests in is an entirely different entity and that he has as limited liability to the company as possible -- he does not want to lose more if the company goes bankrupt or is sued. He also is in the business for the main purpose of increasing his name-recognition, so it's unlikely that he wants any control over the company; he will get others to run everything for him.

With all of this in mind, Frank would be wise to enter into a Limited Partnership or a Limited Liability Company. Both would minimize the amount of risk and responsibility he has associated with Stonecraft Builders, while still providing him with the name and a possible source of income. With a Limited Partnership, Frank could allow others to be the General Partners, who make the decisions and run the company, while he, as the primary investor, is a Limited Partner with access to a percentage of the net income (Jones, 2003). If Stonecraft Builders were to become a Limited Liability Company, Frank still cedes control to others and minimizes the financial and legal risks associated with the corporation, while also still bringing in a dividend if the company is successful; with an LLC, his dividend may even avoid double-taxation and be earned tax-free.

Assuming that Frank takes either approach and gives control of the company to others, Irene will have a difficult decision process to work through when it comes to hiring the jackhammer operator. She needs to ensure that the best person is hired for the job, but she also is limited in the questions she can ask employees, even though some of these questions would help with her choice. It is against the law for her to ask any personal questions involving the interviewer's race, color, national origin, religion, gender, age or disability ("Job Interviews," 2010), and therefore she would not be allowed to ask about Michelle's pregnancy or Eric's epilepsy. However, she is able to ask about the candidates' work experience and is allowed to describe what the job will consist of and then ask the candidates if there would be any limitations to them performing the work. By doing this, she will be able to lawfully determine if each candidate is capable of doing the job.

Looking at the four candidates, it is clear that not all of them are cut out to operate the jackhammer. Nick should not be hired due to his lack of experience with the jackhammer; his epilepsy does not need to be factored into his application. Felipe's inability to speak English would be a liability to the company and a possible safety threat, so he should not be hired as well. That leaves Eric and Michelle, who are both qualified candidates and could therefore both be hired. Even though Eric does not have a high school diploma, his life experience should make up for the lack of education, and he knows how to work a jackhammer. Michelle is perfectly qualified, and cannot be turned down solely because of her (supposed) pregnancy, and is therefore the top choice according to the criteria. However, if either of their interviews provided a legitimate reason to why they would not be able to work, they would not have to be hired.

As a provider for Stonecraft Builders, Paul would do well to incorporate his proprietorship into a corporation. The process would take some time: he would need to file the Articles of Incorporation with his state's official office and would need to come up with a registered corporate name. As part of the name, he would also need to decide what sort of entity he would want his new business to be -- if he was planning on passing over the reigns, a Limited Liability Company would likely be the best choice. If he is unable to find a buyer when he wants to retire, and chooses instead to liquidate his business, he will have to value all of the assets that the company holds and then sell them off, and return his supplies and inventory back to their suppliers.