Legal Underpinnings of Business Law
Imagine that you own each of the following businesses:
Tinker’s Home Security Service (sole proprietorship)
Tinker & Tailor’s Home Security Service (general partnership)
Tinker & Tailor’s Home Security Service (LP)
Tinker & Tailor’s Home Security Service, Inc. (corporation)
Tinker & Tailor’s Home Security Service, LLC (LLC)
- The businesses are being sued for breach of contract. Create a matrix that lists each business, and compare and contrast your personal liability exposure as an owner as a result of the lawsuit.
- For each business entity, analyze how you might limit your liability exposure as an owner.
- Describe a business that you may own some day or that you currently own. (Even if you never plan to own a business, pretend as if you will do so for the purposes of this assignment.) Examine the best business organizational form for the business that you have described, including in your examination personal liability exposure, management, taxation, and ease of formation.
There are plenty of challenges that come with starting and running a business. The benefits of owning a business overshadow the obstacles (Turner & Endres, 2017). According to a 2020 survey conducted by Guidant Financials’ Small Business Trends Alliance, 76% of people who decide to start a small business are “somewhat happy” or “very happy” with their decision. Owning a business is proven to be a satisfying experience for many people for different reasons. The benefits of running any form of business come with great responsibility and constraints that can expose the owner or the entire entity to some legal problems if not managed appropriately.
|Name of Business||Type of Business||Liability Exposure to the Owner|
|Tinker’s Home Security Service||Sole Proprietorship||The owner has unlimited liability. The owner is personally liable—exposure to personal assets possible.|
|Tinker & Tailor’s Home Security Service||General Partnership||Each partner bears unlimited personal liability—exposure to any of the partners’ assets.|
|Tinker & Tailor’s Home Security Service (LP)||Limited Partnership||Limited liability. The owner is not personally liable.|
|Tinker & Tailor’s Home Security Service, Inc.||Corporation||Limited liability. Owner/shareholder not personally liable.|
|Tinker & Tailor’s Home Security Service, LLC||Limited Liability Company||Limited liability. Owner/member not liable.|
In the future, I am planning to establish a business that will involve importing agricultural goods from overseas countries. The business will take the form of a limited liability company. I prefer this organizational form because the business will be responsible for its obligations and debts. Though I may lose money that I will have invested, my assets, such as my bank account and home, will not be used to settle the debts. My assets will also be protected if the business itself, a partner, or an employee is sued for negligence. The business will adopt a Manager-Managed LLC management structure. Every member will be responsible for the day-to-day operations of the company. This management approach will ensure every startup member has contributed significantly to the company’s operations. Since I will be running a single-owner LLC, it will be treated as a sole proprietorship for tax purposes. Starting an LLC will be a straightforward process.
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