Business law principles for accounting professionals

Business Law and Christian Ethics

The terms limited liability and liability protection are often used interchangeably to describe business arrangements that limit the amount of a firm's liability, generally to the amount of assets held by the firm. In other words, those types of business arrangements protect an individual's personal assets from judgment should the person be sued in a professional capacity. One frequent example of a limited liability business arrangement is the limited liability partnership, which essentially "protects each partner from debts against the partnership arising from professional malpractice lawsuits against another partner" (Pakroo, 2013). In those instances, the liability limitation is not limited the individual assets of the partners, but also extends to property owned by the partnership.

Whether or not limited liability or liability protection aligns with a Christian worldview is a tricky moral question because it presupposes that all people who enter into those types of business arrangments do so for the same motives. For example, in a limited liability partnership arrangement, ideally each partner would have sufficient malpractice or other insurance coverage to provide adequate relief to a claimant in a lawsuit. Therefore, entering into a limited liability partnership arrangement would not be a means of hiding assets from wronged victims, but simply a way of protecting assets in the case of a lawsuit. However, if a business owner is aware that a partner has a propensity for committing wrongs and is not adequately insured to cover those wrongs, then entering into a partnership agreement with that person that protects partnership assets from judgment would be immoral. In other words, it is not the arrangement, itself, that is immoral, but the intent of the arrangement. Therefore, Fred needs to consider whether limiting liability for his business would be likely to result in harm to his customers, and, if so, if he could remedy that potential for harm without exposing his personal assets to danger. For example, Fred could double his planned insurance coverage, which would ensure that any injured parties had adequate compensation, while still protecting his family's personal assets.

The question about tax responsibilities is a more difficult ethical conundrum. Jesus did admonish his followers to render taxes to Caesar, although that phrase is often taken out of context, because it was more of a political statement by Jesus that he, not Caesar, was King of the Jews, rather than a bald admonishment to pay taxes without question. Despite that caveat, the reality is that Fred is living in modern America, not historical Israel or Judea; he lives in a time and place where taxes are an established legal obligation. Moreover, unlike in Jesus' times, taxes do not simply go for the benefit of the ruling class; taxes provide food, shelter, and medical care for the needy. Taxes help educate the populace, and provide for the infrastructure that will allow Fred's customers to access his business. Therefore, it is important for Fred to meet his tax obligations.