Compensation

There are many forms of business structures. The most common forms of business are the Sole Proprietorship, Partnership, Limited Liability Company and Corporation. According to Bonny Ablo, a “sole proprietorship” is a business that runs under either the entrepreneurs' name or a fictitious one. The most common of business structure, sole proprietorships account for more than three quarters of all businesses in the US, according to U.S. Census data from 1990-2004. There are quite a few advantages to choosing a sole proprietorship business structure. The taxes are simple, the startup cost is less and there is less paperwork. The drawbacks are that having a sole proprietorship brings with it liability issues. The owner is responsible for any product liabilities. As there is no regulation on the financial statements that need to be provided to the government, many entrepreneurs fail before they realize they are in trouble. Bonny Ablo describes a “partnership” as a business structure that joins two or more people in a legal partnership. Each person who owns a portion of the business is called a general partner. There are several benefits to using a partnership business structure. A partnership can divide up the business responsibilities between partners, ensuring each individual's strengths are catered to. In a general partnership, all parties have equal liability, meaning that if the business should fail; all parties will be responsible for the same amount of loss, with no limit. But in a limited partnership, one or more parties are only responsible for the amount of money that they've invested into the business. All business partners must agree on the focus with which the business will take. Creating a partnership agreement before the start a partnership business will assist greatly in diffusing and potential debates. A Limited Liability Company is a business structure authorized for use in certain US states that allows both the owners and managers to have only limited liability for the financial aspects of the business. An LLC is not a corporation however, even though some entrepreneurs call this business structure a Limited Liability Corporation. Additionally, owners are called members, and there can be an infinite number of them. The disadvantage is that LLC’s can not take their business public. A “corporation” is a legal entity separate from the persons that forms it. Business transactions are carried out via officers and directors for the benefit of its shareholders. A corporation consists of a director, officers and shareholders. Anyone who holds any of these positions within a corporation is not liable for the corporation's financial liabilities. There are several significant benefits to choosing a corporate business structure. Shareholders are not liable for the debts or lawsuits of the corporation, and both the officers and directors have no personal liability for any actions taken by the corporation. Shareholders vote amongst themselves to appoint a Board of Directors, who make the managerial decisions about the company on a larger scale. However there are drawbacks of a corporation. Unlike all of the other business structures, corporations are required to file numerous, regular reports with regards to their formation, contact information, registered agent, officers, directors and others. There are many more activities that are required by the state when running a corporation, such as adopting bylaws, holding annual general meetings, electing board members, appointing officers, drafting resolutions, taking and archiving minutes of each and every corporate meeting, maintaining a registered agent, and paying taxes. Riordan Industries is a corporation and therefore has to comply with the legalities of a corporation. The existence of a corporation requires a special legal framework and body of law that specifically grants the corporation legal personality. Corporate statutes give Riordan Industries the ability to own property, sign binding contracts, pay taxes in a capacity that is separate from that of its shareholders. As a corporation, Riordan Industries owns properties which can be divided in to two categories: tangible and intellectual properties. Tangible property is the type of property which can be seen and touched. Delivery trucks, desks, computers, inventory, and the building and land owned are all forms of tangible property (Jennings, 2006). Forms of intellectual property include patents, copyrights, trademarks, trade names, and trade dress. Protections include federal rights, international protections, and common-law rights of action for the damage to or taking of these forms of intangible property. Any process or tools that Riordan industries have developed need to be patented and protected. For example, the chemical process for the plastic molding is intellectual property and is patented. The ERP system is an intellectual property and should have a copyright. As a corporation, Riordan Industries is also subjected to enterprise liability and product liability. Enterprise liability, also known as market-share liability, is a legal doctrine under which individual entities can be held jointly liable for some action on the basis of being part of a shared enterprise (Wikipedia). Enterprise liability is a form of secondary liability. For example, if someone was injured by the manufacturing activity at Riordan Manufacturing, a court might apply the enterprise liability doctrine to allow recovery from Riordan Industries, which holds all the assets. Product liability is the area of law in which manufacturers, distributors, suppliers, retailers, and others who make products available to the public are held responsible for the injuries those products cause. Product liability claims can be brought under a number of theories. Liability arises from a mistake or oversight in the design of a product, which makes it dangerous when used as intended, or when used for another reasonably foreseeable purpose. Liability also arises from a defect that results from the manufacturing process. A marketing defect involves such issues as inadequate warning labels or instructions, which, for example, prevent a user from recognizing a defect in the product, or from being aware of how to safely use or apply the product. Riordan Industries has to assure that the products it manufactures adhere to the manufacturing process and meets specification and does not cause any harm to the consumer. Products should have labels notifying the consumer the consequences of misuse of the product. Distributors, suppliers and retailers must also be notified of the same to avoid liability suits. Products should go through a vigorous quality assurance program. Business laws and trade laws have always played an important role in developing trade and business transactions. With the advent of market globalization and electronic commerce, not only trade laws and international trade laws are playing greater roles but complete new areas are being developed particularly as it relates to intellectual property rights and dispute settlements. International law is the law governing relations between States. It regulates the global commons, such as the environment, sustainable development, international waters, global communications and world trade. Riordan Industries has a manufacturing site in China that manufactures plastic fans. Litteral and Finkel should advise Riordan Industries about the international laws. In order to avoid any disputes, Riordan Industries should understand and abide by the various international laws that apply while doing business in China. Despite taking all the precautions and complying with the law, there are times when disputes arise. These disputes may arise due to liability issues, human resources issues, infringement on tangible or intellectual property just to name a few. Due to the increasing caseloads, rising costs of litigation, and time delays continue to plague litigants, more companies have begun experimenting with ADR programs. Alternative dispute resolution (ADR) offers parties alternative means of resolving their differences outside actual courtroom litigation and the costly aspects of preparation for it (Jennings). ADR typically includes arbitration, mediation, early neutral evaluation, and conciliation. Riordan Industries should first entertain an ADR program before going to court. According to Ian Jones, corporate governance is the system by which business corporations are directed and controlled. Riordan Industries should structure and specify the distribution of rights and responsibilities among different participants in the corporation, such as, the board, managers, shareholders and other stakeholders, and spell out the rules and procedures for making decisions on corporate affairs. By doing this, it will provide the structure through which the company objectives are set, and the means of attaining those objectives and monitoring performance.