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LEGL 226 Chapter Notes - Chapter 31: Limited Liability Partnership, Sole Proprietorship, S Corporation

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peachlion237
27 Sep 2016
School
Towson University
Department
Legal Studies
Course
LEGL 226
Professor
Staff

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Document Summary

Chapter 31- starting a business: llcs and other options. Sole proprietorship- an unincorporated business owned by one person. Taxes: flow-through tax entity-an organization that does not pay income tax on its profits but passes them through to its owners who pay the tax at their individual rates. Corporations-dominant form of business where the company is its own economic entity. Limited liability- a corporation protects managers and investors from personal liability for the debts of the corporation and the actions of others, but not against liability for their own negligence (or other torts and crimes) Transferability of interests- company stock can be bought and sold easily. Duration- they can continue without their founders. Logistics- require substantial expense and effort to create and operate. Taxes- a corporation is a taxable entity that must pay income taxes on any dividends from the corporation. The dollar is taxed twice before it is deposited by the shareholder.

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Related Questions

Proof read please

In deciding which entity to use for a new business, it is good to review the benefits and disadvantage of each one. A corporation According to e-text (page 1094) A corporation is liable to third person for the act of it is officers, employees, and agent to the same extent that a natural person is liable act of agents and employees. Because of the corporation is a separate legal person debt, the debts that owe are ordinarily the obligation of the corporation only. It is good to know the advantage and the person itself is not responsible of the corporation debts because nobody want debts that goes after their personal properties. I think that’s the reason business owner choose a form of corporation however, the double taxation of appreciated assets on sale or dissolution is a bad disadvantage but it can be a right choice for certain situation because nobody wants to hold liable for their business debts, or personal income or any other personal assets. An owner always wants taxable profit and retain growth to pay down their business debts, even though the corporations taxes are extremely higher than a LLC, but I still recommended a business to choose a corporation that better benefit for them. A LLC taxes are lower but owner is personally obligator to any debts. It is good to know that corporation can also deduct disability insurance for owner-employees which is a significant advantage, reduced gain for capital gain and audit potential for tax liability A corporation enjoys limited liability, while partner is personal liable for the business. Frost, T. S. (1984). In regard to taxes, a corporation can generate tax saving if the corporate tax rate is lower than the personal one and if earning is retained in the corporation. the worse part will be the shareholder because they can be held personally liable for corporate debt and the creditor can now go after the shareholder property and their bank account and other assets that satisfy their dues. Frost, T. S. (1984). Tax aspects of the form of doing business. Dun and Bradstreet, Inc.D & B Reports, 22(1), 58. Starkman, J. (2007). Advantages of a C corporation. The Tax Adviser, 38(10), 617-618.

NEED 10 PAPER

You are the manager of Acme Fireworks. The company started in the owner�s garage two years ago and now has 15 employees that you manage. The company started as a sole proprietor, and the owner has never changed the entity. The company makes and sells fireworks. The owner has informed you that the company has received inquiries from several large retailers about the company�s ability to fill large orders on a regular basis. The owner told the retailers that the company could fill such orders, and a price per unit was agreed upon. No other details were discussed. The owner is anticipating that new employees will need to be hired but is worried that if the large orders do not continue, the company will not have the funds to pay the new employees. The owner is now considering changing the business entity but does not know what entity to form or how to form it.

The owner has asked you to do the following:

  • Explain potential personal liability for injuries to consumers caused by the product.
  • Analyze whether the owner formed a contract with the retailers applying the five elements as discussed from Week Two to the hypothetical facts.
  • Analyze how different employment types could be used with application of hypothetical facts.
  • Recommend a new business entity. Provide a rationale to support your recommendation

For each task, be sure to analyze the relevant law, apply the facts to the law, and make a conclusion. OUTLINE BELOW

  1. Introduction
  1. Provide a brief overview of the content contained within the proposal.
  2. Thesis: Transition from the current sole proprietorship to a Limited Liability Company (LLC) is the most seamless and logical progression based on the projected business model.
  1. Assessed Product Risk and Personal Liability
  1. Discuss the inherent risks associated with firework manufacturing and shipping.
  2. Note the variations/correlations in personal and business liabilities due to perceived negligence resulting in consumer/employee injury.
  3. Potential liabilities resulting from defective merchandise.
  4. Contract Viability
  5. Review the five elements of a contract from the information provided.
    1. Offer
    2. Acceptance
    3. Consideration
    4. Legality
    5. Capacity
  6. Provide recommendation of contract viability/probability
  1. Recruiting and Compensation
  1. Employment Types
    1. Full-time
    2. Part-time
    3. Casual
    4. Daily/weekly hire
    5. Probationary
  2. Determine the best option to increase productivity while minimizing prolonged or unexpected expenses
  3. Business Entity
  4. Discuss the different business entities available
    1. Sole Proprietor
    2. Partnership
    3. Corporation
    4. Limited Liability Company
  5. Compare and contrast benefits of an LLC v. other archetypes
  6. Conclusion
  7. Review all previously discussed information and develop a coherent vision
  8. Discuss aforementioned vision as it relates to thesis statement
  9. CHAPTER 5: Understanding and Choosing a Legal Structure. (2012). Women's Small Business Start-Up Kit (9781413317220), 149-186.

  10. Pakroo, P. H. (2014). CHAPTER 1: Choosing a Legal Structure. Small Business Start-Up Kit, 7-28.

Question 1: Answer the following MC questions...

a). Samuel F.B. Morse patented the (5 points)
A. telegraph
B. automobile
C. audio recorder
D. radio transmitter
b). Your friend wants to open a clothing shop. A necessary capital resource is a (5 points)
A. place to open the shop
B. knowledgeable fashion manager
C. license to conduct business
D.highway billboard for advertising
c). Jessica is a violinist who believes she can extend her method of learning music to early childhood education. She opens a preschool in her hometown, using her expertise to form an arts-based program. What factor of production is this? (5 points)
A. Capital
B. Entrepreneurship
C. Labor
D. Land
d). Your friend hopes to expand her business to multiple locations. It would be best for her to create a (5 points)
A. limited liability company
B. sole proprietorship
C. corporation
D. partnership
e). Root and Vine is a gardening collective and local delivery service started by two friends. Their clientele has grown, and they want to expand. The owners like the idea of protecting their personal property, but they want to maintain control of the business. Which type of organization might best suit their growth? (5 points)
A. Sole proprietorship
B. Partnership
C. Limited liability company
D. Corporation
f). An oligopoly is a market for a good or service that (5 points)
A. has few competitive firms
B. is perfectly competitive
C. has one buyer
D. has one seller
g). The greatest goal in advertising is to convince us (5 points)
A. "wants" are unnecessary
B. the firm has the best price
C. a particular product is a "need"
D. the product is the same as other firm's products
h). "Don't be like John, who had no health insurance when he needed emergency surgery. We make health insurance easy and affordable." This advertisement targets your (5 points)
A. fears
B. rituals
C. emotions
D. social values
i). Why do monopolies and oligarchies benefit producers over consumers? (5 points)
A. Companies control price through demand.
B. Competition is driven by factors other than price.
C. Demand influences production more when competition is less.
D. Few producers can generally control prices.