Business Entities, Laws, and Regulations

Business Entities, Laws, and Regulations

There are many factors that need to be considered when starting a business. There are many different types of business entities, such as a sole proprietorship, a partnership, a limited liability partnership, or a corporation. Each kind of entity has advantages and disadvantages, and what might work best for one entity may not work so well for another. Thoroughly understanding how control, taxation, and liability issues are different from one entity to another can help to better decide which entity is more suitable for a particular type of business.

Limited Partnerships

Limited partnerships are an example of the types of business entities that owners may choose to open. The restaurant/bar example that Lou and Jose plan to open would be considered a limited liability ownership. What makes it limited is the fact that they do not have enough funds to open the business, which forces them to rely on Miriam to provide the funds. Miriam will be providing funds but will not be participating in the everyday operations of the business. When it comes to control of the business the general partners, who, in this case, are Lou and Jose, have the ability to establish authority in the day-to-day decisions regarding operations. Regardless of the fact that Miriam has invested in this company, she will only be able to invest capital and not be able to make any decisions regarding the business. As stated in The Legal Environment of Business, Ch. 13, “Each general partner is personally liable for all debts and liabilities”. The difference with Miriam, when compared to the other owners, is that she is only liable for what she invested in the partnership. The partners file taxes under their personal return and taxes are calculated based on each individual’s case. Limited Partners do not have to pay corporate taxes.

Corporation

Corporations are an entity that would best explain the extermination business example. In this scenario, Frank...