Legal entity structures for restaurant, extermination, and construction businesses

Business Scenarios

In business, one of the major challenges facing most organizations is: determining the kind of entity that will be established. The different cases that we are examining (the bar / restaurant, the extermination business and the construction company) are highlighting how there are variety of laws and regulations for each entity. To fully understand the most relevant aspect of the law that applies to each one requires: conducting an analysis of the various organizations. Once this takes place, it will provide the greatest insights as to what specific factors could be affecting each of the various businesses.

Restaurant / Bar

The restaurant / bar will benefit from: establishing a private placement offering. This is when you are selling an investment opportunity to a limited number of investors, without taking the company public through the traditional avenues (such as: IPOs). The reason this was selected, is because it can provide a number of different benefits. Under the Securities and Exchange Act of 1933 Section D, it states that private placements can be established to: provide the majority owners with operational control of the business. The various taxation issues are deferred, until the time that investor begins to start receiving some kind of an income from their investment. Once they begin accepting the money, is the point that they will have to pay income tax on the amount (as ordinary income). Liability issues are reduced dramatically, as investors in the private placement will have limited amounts of authority (as far as of: operational control or decision making). As these kinds of agreements are designed to provide businesses, with a partner who can give them additional working capital. The helps the entity to protect itself against possible liability issues, by giving private placement investors no operational role. Instead, they are only interested in the long-term profit potentials of the business. ("Astarita," 2009) (Eadie, 2011)

Construction Scenario

In this case, the best option is to establish a limited liability company. This is when the overall amounts of responsibilities are limited to: the percentage of ownership of the different shareholders. As a far as control is concerned, this means that management must carefully monitor who they are hiring to work as the jackhammer operator. The reason why, is because of the possibility of the on the job injuries that are work related. Taxation issues are limited mainly to the percentage of ownership of the various shareholders. As all income from the business will be divided and reported on the individual tax returns of the business owners. The possible liability issues include: workplace injuries, negligence and the loss of income that an employee can claim (in the event they are injured). To protect itself against the different risks, the business needs to have policies in place that will monitor the activities of managers, to ensure that they are following all regulations. This will help to prevent any kind of frivolous lawsuits from being filed against by the company. At the same time, this corporate structure will limit the amounts of protection for the business owners to: their percentage of the company. ("What is a Limited Liability Company," 2011)

Clearly, when you are establishing any kind of business entity there are going to be a number of different risks that will be facing the organization. As a far as the restaurant / bar these include: operational control for shareholders and how income is being reported. This is because the owners are seeking out, someone who can fill the role of financial partner by: providing them with working capital. While the extermination business, wants to limit their exposure from the actions of other business owners that they are working with around the country (franchisees). The construction company is seeking to reduce their exposure to on the job injuries. These different elements are important, because they are showing how all business must be able to limit overall amounts of risks that they are facing.

This will help to improve the ability of these companies to be able to adjust to shifts that are taking place in: the economy and various regulations. Once this occurs, it means that the overall amounts of risks are reduced dramatically. The reason why is because these factors have been taken into account as part of the business strategy. This will improve the ability of an organization to: adjust to the different changes that they are facing. At which point, they can be able to ensure that they are in compliance these different regulations, while making certain that the underlying risks have been reduced as much as possible.