Business_Entities,_Laws,_and_Regulations

Business Entities, Laws, and Regulations Regina Holmes BUS415 October 24, 2011 G. Alan Williams Business Entities, Laws, and Regulations An entrepreneur or entrepreneurs interested in starting a business must not only consider what type of business to operate but also the entity, laws, and regulations the business and owners become subjected to based on its operation. In a sole proprietorship the owner is personally liable for his or her debts as there is no separate entity between ownership and personal assets. As a sole proprietor the owner must file profit and loss as part of his or hers personal tax return. In a general partnership personal liability is divided among each partner with any profit or loss filed as part of each partner’s individual tax return. A limited liability company maintains a separate entity and its members remain harmless against any debts and liabilities beyond his or her capital contribution (Cheeseman, 2011). Based on the election of being taxed as a corporation or partnership each member must either file profit or loss on their individual tax returns or taxed as a corporation. Like a general partnership and limited liability company, a corporation operates as a separate entity with its owners bearing limited liability up to his or her capital contribution. Operating as a corporation benefits the owners by carrying no personal liability as well toward company debt or against personal assets. Restaurant/Bar Business Entity Collaborating together to open a restaurant and sports bar Lou, Jose, and Miriam should establish a limited liability company as the best operating entity option. Miriam, as the silent investor, stands the opportunity of making a profit based on her established percentage in ownership. Entering into an operating agreement, either oral or written, records the percentage of ownership each member maintains. As the primary investor, Miriam has the option of requesting a higher ownership of interest based on a certificate of interest filed with the state (Cheeseman, 2011). Prior to filing the certificate of interest both Lou and Jose must also agree to the terms set forth in the agreement. Lou and Jose’s knowledge allows the two partners an opportunity to protect Miriam’s interest in the company as well as make a profit for themselves. The three owners benefit operating as a limited liability company because everyone maintains protection against company debt and avoid recovery attempts against their personal assets. In addition the partners collectively may make decisions. Even though Lou, Jose, and Miriam risk losing their initial capital investments, they remain harmless from company debt and liabilities as a separate entity. Running the business as a limited liability company allows the members to avoid double taxation as each member claims profit and loss on their individual tax returns (Cheeseman, 2011). Conducting business as a limited liability company subjects the business to the Uniform Limited Liability Act that mandates adherence toward uniform laws and regulations. The restaurant must also comply with Occupational Safety and Health regulations ensuring working conditions remain safe for all employees. Depending on state laws the owners will need workers compensation and liability insurance should a patron get hurt in the establishment. Providing Lou, Jose, or Miriam maintain no responsibility of tort towards a patron, the patron may sue the restaurant for recovery of damages. Lou and Jose remain harmless up to their personal capital contributions. Extermination Business Entity Looking to open a chain of exterminating businesses across the United States, Frank should franchise the company as an established corporation. Operating as a corporation allows Frank to keep the business running perpetually and as a separate legal entity (Cheeseman, 2011). The corporation’s shareholders have limited liability up to their capital contribution but maintain no personal liability toward the company’s debt and liability. The shareholders also have control of making business decisions. Incorporating the business Frank must consider and adhere to state laws and regulations the company does the most business in. The owner must also file with the state the articles of incorporation and may not operate until official approval. As an S-Corporation the exterminating company passes profit or loss to its shareholders. Each shareholder must file any profit or loss on their individual tax returns avoiding double taxation through the corporation as a separate entity. Depending on the state requirements Frank will need to maintain workers compensation, bond, and general liability insurance. To conduct the corporation as part of a franchise Frank must enter into a franchise agreement similar to the limited liability company operating agreement. By doing so each partner agrees to the established terms outlined in the contract. As an exterminating company Frank must comply with Occupational Safety and Health to ensure his staff receives proper training to protect customers against harmful chemicals as well as themselves. Construction Scenario As the hiring manager for Surebuild, Inc. Mei-Lin, the hiring manager, must maintain fairness and professionalism while considering each applicant based on Civil Rights Act established in 1964 (Cheeseman, 2011) Mei-Lin must keep in mind that she cannot discriminate against any applicant based on race, color, nationality, sex, age, or disability. Michele’s pregnancy causes the employer a level of hardship despite her qualifications because should she get hurt on the job the company would wind up paying workers compensation claims for Michele and her unborn baby. The company would also need to accommodate Michele in another position if Mei-Lin hired her, this alone could cause hardship because the original position would remain unfilled ultimately costing the company money. In this case, the perceived discrimination becomes overridden in terms of the American Disability Act and sex discrimination because Michele’s condition is not subject to either act. Eric, on the other hand, at the age of fifty five may have a case because the employer must prove that a possible decline in job offering has nothing to do with his age. If Mei-Lin solely avoids hiring Eric because of his age the company commits discrimination thus violating his rights. If Mei-Lin overlooks Felipe based on his application and skills because of the language barrier he may sue the company as well. Not hiring Felipe strictly because he does not speak English shows discrimination against his nationality. If his application was denied based on not having a high school diploma as part of the job requirement, denying the application becomes justified and not subject to the act. Considering Nick who has a known disability does not automatically disqualify him from the position and maintains a level of discrimination if Mei-Lin does not select him based on his disability. Under the American Disability Act a company must make accommodations for those with disabilities with relief toward the employer from any hardship (Work World, 2011). By accommodating the processes and facility to fit Nick’s needs the company demonstrates its willingness to hire Nick working with his disability. As with Felipe, if his application becomes denied based on not having a high school diploma as part of the job requirement, denying the application becomes justified and not subject to the act. This paper presented two scenarios that addressed different types of business entities considering state and federal laws, regulations, and other aspects associated with each operating structure. This paper also presented a scenario that addressed possible violations against the American Disability and Civil Rights Act as well as an employer’s right in denying an application due justly. References Cheeseman, H. R. (2010). The legal environment of business and online commerce: Business ethics, e-commerce, regulatory, and international issues. (6th ed.) Upper Saddle River, NJ: Pearson Prentice Hall. http://www.workworld.org/wwwebhelp/americans_with_disabilities_act_ada_.htm