Business Entities, Laws and Regulations Paper
The following paper will discuss two hypothetical businesses and the organizational structure that presents the best choice for each business with consideration for control, taxation, and liability issues. It will address the laws, regulations and risks each business must face. The paper will also include a discussion of a hypothetical situation in which a hiring manager must choose an applicant while considering laws, regulations, and the risks against which the business must protect itself when making the decision.
Akiva and Tara are newly licensed as obstetricians and want to open a birth clinic together. They will ...view middle of the document...
Organizing the business as a limited liability partnership offers Akiva and Tara the best combination of liability protection, tax benefits and control of their business.
Frank is a wealthy investor who plans to open a chain of exterminating businesses across the United States. Frank should organize his business as a franchise. Franchising offers benefits to the franchisor such as being able to expand into multiple markets and retaining control over any trademarks, patents, copyrights and trade secrets used in the business. Franchisors may also collect a percentage of the profits from franchisees in the form of royalties. Franchisees benefit from having access to the franchisor’s knowledge and resources (Cheeseman, 2010). They also do not have to pay the costs associated with establishing trademarks, copyrights and patents. Franchisors and franchisees are separate legal entities for purposes of taxation and liability, at least in most cases. This means that the relationship between franchisor and franchisee is one of an independent contractor and, generally speaking, neither party is responsible for the torts or contracts of the other (Cheeseman, 2010). Organizing his business as a franchise gives Frank control over who he will license as a franchisee, the fee he will charge for the franchise agreement and the markets in which his company will operate. Taxation of the business will depend on how the franchise company is organized. If Frank incorporates his business, the company will be taxed as will the dividends paid to shareholders. If Frank chooses to form an LLC as the foundation for his franchise, the company will not be taxed as a separate entity but its members must report profits and losses on their individual tax returns. For Frank’s purposes, forming a chain-style franchise of exterminating businesses throughout the country provides the best way to present a uniform service and product to consumers, maintain control of trademarks and copyrights and to operate in a variety of markets using franchise agreements.
Mei-Lin has advertised the position of jackhammer operator and specifies that the successful applicant must have a high school diploma. She has received several applications and must make a hiring decision. To remain compliant with the law, Mei-Lin must consider several factors when choosing an applicant. She cannot, for example, consider factors such as race, color, age or gender when making her...