Business Entities, Laws, and Regulations Paper

Topics: Corporation, Partnership, Types of business entity Pages: 7 (1407 words) Published: December 14, 2014


Business Entities, Laws, and Regulations Paper
Greg Celentano
BUS/415 – Business Law
Teresa Anderson
June 13, 2011

Business Entities, Laws, and Regulations Paper
This paper will examine two business scenarios and determine which business entity is the best choice for each business after taking in to consideration control, taxation, and liability issues. In addition laws and regulations each business must consider in starting the business will be identified along with the risks that each business must protect itself against. Next this paper will examine a construction scenario and identify the employment laws and regulations with which the business must comply in making a decision in regards to which applicant to hire. Restaurant/Bar

Lou and Jose plan to open a sports bar and restaurant where customers socialize and watch sporting events on large-screen TVs that hang around the bar. They do not have much money, but they do have Miriam, a wealthy investor who does not have time to participate in the business, but wants to provide capital to start the business in return for a percentage ownership. Business Entity

For this business scenario the best business entity is a limited partnership or special partnership. There are two types of partners in a limited partnership: general partners and limited partners. General partners invest capital, manage the business, and are personally liable for partnership debts. Limited partners invest capital but do not help with the management aspect and are not personally liable for debts beyond their capital contribution. Lou and Jose will be able to contribute their money and be responsible for managing the business. Miriam will contribute her money and that is all that is required of her. Often in a limited partnership, there is a limited partnership agreement that states the rights and duties of both partners. This document will state the terms and conditions regarding the operations, termination, and dissolution of the partnership. The limited partnership agreement may also describe how profits and losses broken down between the general and limited partners (Cheeseman, p. 261).General partners have unlimited liability for the debts and obligations while limited partners are liable only for the debts and obligations up to their capital contributions, and they are not personally liable for the debts and obligations of the limited partnership. In 2001 there was a change to the Revised Uniform Limited Partnership Act. Cheeseman (2010) stated, “The limited liability partnership agreement can permit certain or all limited partners a say in how the partnership’s business should be run.” A limited partnership has a tax advantage in that it is a flow-through instrument, meaning all profits and losses flow directly to the individual limited partners. The business itself pays no taxes on the income (Spaulding, 2005-2011). Laws, Regulations, and Risks

Some of the laws and regulations the partners need to consider are the need for an operating license, health permit, and liquor license. If the business tries to operate without these licenses or permits they take the risk of being shut down. The partners also have to prepare for every day risks such as having a safe environment. If there are TVs hanging they should be installed by professionals and up to code to avoid the risk of TVs falling on customers or employees. The next business scenario that will be examined is two individuals that want to start a business in the medical field. Professional Practice

Akiva and Tara have just completed all educational and experiential requirements to be licensed as obstetricians. They want to open a birth clinic together. They will take out a large loan to finance start-up costs. Akiva and Tara should start a Limited Liability Partnership (LLP) business entity. In an LLP, all partners are limited partners who can only lose their own capital if the...

References: American Association of Birth Centers. (2007). Birth Center Regulations. Retrieved from http://www.birthcenters.org/open-abc/bc-regs.php
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.
Spaulding, W. (2005-2011). The Tax Advantages of Limited Partnerships as Direct Participation Programs (DPPs). thismatter.com. Retrieved from http://thismatter.com/money/funds/dpp/limited-partnership-taxation.htm
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