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This paper discusses three business scenarios. The discussion will cover the legal, environmental conditions of each business scenario. The paper will discuss each business entity in light of the nature of the business, taxation laws, and liabilities. The business entities discussed are those in the USA. Hence, the business legal environment considered is that of the USA. Depending on the business entity scenario, different internal and external obligations conditions will arise. The conditions that each business entity operates on will influence its survival and profitability, currently and in the future. The paper will thus examine each business scenario’s internal and external conditions to find out its survival and profitability.
Business scenario: Restaurant/ Bar
The business entity is a partnership business since it is made up of two persons voluntarily coming together as co-owners of a business for profit. The partners can form a business with little or no formality (Madura, 2007). To start the business, the partners need to come up with an agreement. Where the agreement does not provide essential terms or contingency, a uniform partnership act, fills the gap. The partnership agreement may be oral, written, or implied by the conduct of the parties. The entity will thus, be required in law to be registered as a partnership business. The partners are liable personally for the debts and obligations of the partnership.
The nature of the entity is that of a bar and a restaurant. Thus, the entity needs to comply with regulations and laws that cover such business entities. The regulation to observe will depend on the state the entity is located. This is because; different states have different regulations of controlling business entities under their territory.
The initial partners, Lou and Jose, have no capital to start the business. The capital to start the business is to be sourced from Miriam, who expects to be rewarded as a partner for contributing the capital. A partnership is not created by payment of debts. Thus, Miriam is not one of the partners, as the partnership is formed primarily to share profits and management. The partners will have to come up with a formula guiding them on how to share the capital contribution amongst themselves. The partners are liable to repay the capital borrowed. Also, the partners are required, by law, to come up with a business name under which the established company is to be registered. The name can be the name of one partner or both names of the partners or any fictitious name. The name selected as the trademark cannot imply that it is a corporation by inserting the term Inc. Additionally, the name should never be the same as that of another already existing business entity and must be filed in the appropriate government agency for it to be a trademark.
A number of obligations will prevail during the operation of the business. The main obligations that the entity is likely to face include payment of taxes and levies and social responsibility. Business entities under partnership do not pay taxes to the federal government (Cheeseman, 1994). The partners pay taxes through their personal income tax returns. The firm only files an information return telling the government the amount of profit or losses incurred. Also, the state government collects levies and permit fees at different stages. Tax payment is made at the end of each federal government’s fiscal year.
As another important feature, the partners or employees are liable to injury to a third party. The injury can result from a breach of trust, negligence, or fraud. The injury must have occurred in the process of ordinary business activities or under the authority of co-partners. A person who feels hurt by the conduct of the partnership business may sue one partner or more, separately. The compensation to the plaintiff can be recovered from one of the partners. One of the partners may seek indemnification from the other partner who caused the injury. Partners act as agents of the partnership when entering into contracts with suppliers, customers, and lenders. Thus, they are liable for the contracts and debts of the partnership. A third party suing the partnership for contract or debt shall list all the names of partners in the suit. Failure to name any of the partners restricts one from collecting claims from the other partner. A partner has the full right to allege indemnification from the partner who has not paid a share of the loss (Madura, 2007).
Business scenario: Extermination Business
The business entity is a sole proprietorship since only one person is to own all the businesses. To start the business, the investor will not need the federal or state government’s approval formalities (Cheeseman, 1994). Only a license in some local authorities is needed to start the business. In some of the states, however, the investor may be required to fill a business name statement with the government agency. The business may start under the name of the investor or the name of his choice. The name of the business should not be similar to that of another existing business. The statement contains the address and name of the applicant, the trade name, and the name of the business. This is meant to disclose the real owners of the business entity.
The investor reserves the full right to making all management decisions. Additionally, all profits and losses accrued are shared solely by the investor. If, in the future, the investor decides to transfer or sell the business, he will make that decision alone without any other party’s approval. If the business fails, the investor risks his entire capital contribution (Cheeseman, 1994). The investor’s personal assets may be sold by creditors who may have claims against the business. In this case, the business acts as the security for the creditors, in case the investor fails to clear owed debts.
Because the owner and the business have no separate legal entities, the businessman will be liable for the business’s contract and torts committed in the running of the business. Taxation under the sole proprietorship is not paid at the business level to the tax collector but is rather paid by the investor (Dillavou, 1986). This is done by the sole proprietor reporting profits and losses from the business in his personal income tax return. This is meant to avoid double taxation. Thus, the tax return is filed to the state and federal governments by the owner.
Business scenario: Construction firm hiring an employee
The nature of the business entity of Surebuild incorporation construction is a company firm since it is under the laws incorporating it. This means the company can enter into a contract, sue, and be sued, on its own. The owners of the company cannot thus be held responsible for its liabilities but with some limited exceptions. To hire an employee to fill the job vacancy advertised, the firm will have to follow the laws that regulate the hiring of workers. Title VII law of the civil rights act of 1964 prohibits job discrimination by employers. The job advertisement must be within the law, such that it does not discourage or show preference in terms of applications.The law also prohibits hiring criteria that follow stereotypes and assumptions about a person.
If Surebuild’s job application procedure requires a test, the test should be fairly done as well as relevant to the job. Also, where an applicant is disabled and requires assistance, the assistance should be provided. The assistance, though, should not cause difficulties or result in additional expenses. The laws to be noted include discrimination against an applicant’s race, color, age, disability, genetic information, pregnancy, gender, and the nation of origin. If the firm fails to follow those laws, the firm risks being sued by the applicant (Dillavou, 1986). Aggrieved parties may go to court for compensatory damages. In this case, the firm issued court and asked to compensate the discriminated applicant.
It is also important for the firm to follow recruitment codes created by the Workers Union. Workers’ unions have rules that protect applicants from discrimination by employers (Cheeseman, 1994). The firm should additionally provide an insurance scheme for the worker, in case of an accident. The firm is also responsible for the forwarding of the employer’s taxes and other relevant payments from the worker’s salary. This is done at the end of every remuneration month (Madura, 2007).
Cheeseman, R. (1994).Legal Environment of Business and Online Commerce. NewYork: Prentice Hall.
Dillavou, R. (1986). Principles of Business Law. NewYork: Prentice Hall.
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Madura, J. (2007). Introduction to business. 4th Ed. Mason: Thomson Learning Academic.