In this assignment, the first section I will be discussing what type of business entity the business model of Lou and Jose should have with their restaurant/bar and the other business model as an extermination business by Frank. I will also discuss each models characteristics and factors in starting those businesses with relation to laws and regulations. For the Second section it will focus on the construction scenario its elements and the laws and regulations in making the decision.
The first business model I will discuss is the restaurant/bar that Lou and Jose want to open. In my opinion the business entity that best fits what Lou and Jose want to have is the General Partnership. It’s a partnership in which each of the partners is liable for all of the firm's debts, and the actions of one partner are binding on each of the other partners. In this case Lou and Jose have an idea to open a restaurant slash bar in which patrons could hang out and watch sports on different T.V. throughout the area.
The thing is they don't have the capital to support their business venture but with the help of an investor that they know (Miriam) she will provide them with the capital to get the business going on the condition that she has a percentage of ownership in the business. The taxation aspect to a general partnership is they have an advantage because this business entity is just like a sole proprietorship which means the business is not taxed. The way it works is, it becomes a shared responsibility in which income, losses, and gains are passed through to the general partners in accordance to the allocations provided by their partnership agreement.
The advantage to this form of business is that the partners (Lou, Jose, and Miriam) can agree among themselves as to how income, losses, and gains are divided among the partners. The liability issues for a general partnership are there are none. The way it works is for each one of the partner’s they have personal liability for the obligations of their partnership. The only concern of liability for them is, in a general partnership they are limited in their ability to raise capital from outside investors due to the prospect of potential personal liability and possibly usually limited markets for resale of a general partnership interest, but since one of their partners has the capital to assist in the business it shouldn’t be a problem.
The types of laws and regulations used for a General Partnership are the Securities Act of 1933 which requires that investors receive financial and other significant information concerning securities being offered for public sale and prohibit deceit, misrepresentations, and other fraud in the sale of securities. Another law is the Sarbanes-Oxley Act which enhanced corporate responsibility, financial disclosures and combat corporate and accounting fraud.
Also is the Model Business Corporation Act which is a law that sets up basic rules for a corporation or business to follow and practice. With these laws and many others Lou, Jose, and Miriam establish these basic rules of the road to avoid potential penalties from local and state governments for not being in compliance as they should be. This protects them from having to close down or possibly from being fined for not having to proper compliance as needed.
The second business model that I will discuss is the Extermination business that Frank wants to open. In my opinion the business entity that best fits what he (Frank) wants to have is the Sole Proprietorship which is a business owned by one person. In this case, Frank wants to start an extermination business across the United States and needs no additional capital from anyone else because he has his own capital to start and support his business venture. The taxation aspect to a sole proprietorship is for tax purposes, there is no distinction between the sole proprietor and the business. All income and expenses of the business are reported on the sole proprietor’s personal tax return.
This means that the net income from the business is taxed only once. The liability issues for a sole proprietorship are there are none. In this case there is no legal distinction between the owner and the business, such being the case with Frank who is a sole proprietor. He is personally liable for all the debts and obligations of the business that he started. It also means that on the death of the owner, the business enterprise terminates as well, leaving only the assets of the business such as equipment, accounts receivable, and real property. The assets used in the business are not separated from the other assets of the business owner which then will make it difficult to sell the business as a whole after the death of the sole proprietor.
The types of laws and regulations used for a sole proprietorship is the Securities Act of 1933 which requires that investors receive financial and other significant information concerning securities being offered for public sale and prohibit deceit, misrepresentations, and other fraud in the sale of securities. Another law is the Sarbanes-Oxley Act which enhanced corporate responsibility, financial disclosures and combat corporate and accounting fraud. Another law was the Model Business Corporations Act that sets up general laws for a business to be governed by. Even though Frank is a sole proprietor, he still has to abide by certain laws that most corporate entities have to follow. With the laws discussed it helps protect Frank from being in non-compliance with state and local governments across the United States and avoids possible fines or closures due to risky business practices.
For the construction Scenario it begins with the hiring manger Mei-Lin for a construction company that advertised a position for a jackhammer operator. So far they received four applications, the first being a 35 year old woman named Michelle who is pregnant who meets the qualifications which are must have a high school diploma along with the fact she has experience already as a jackhammer operator.
Next is Eric who is 55 who is also experienced as a jackhammer operator but has no high school diploma. Third is 38 year old Felipe who is also experienced as a jackhammer operator but also has no diploma and cannot speak English. Last is Nick who is 23, a recent college graduate with no experience as a jackhammer operator, but is epileptic. In my opinion there are only two candidates that are possibly able to be considered for the position which are Michelle and Nick. The other two candidates Eric and Felipe don’t meet the basic requirement set forth in the advertisement of the position. In regards to Michelle and Nick they have the opportunity because they meet the requirement for the position but, they each have set backs that prevent them from being hired. Now under the American with Disabilities Act it states, “Anyone who has a physical or mental disability that significantly affects the person’s life function.”
The type of position they applied for can be found as both dangerous to them and people they would work with. Having individuals capable of performing the job without harming others has to be considered and having a pregnant woman in that position may due damage to the child or the possibility of Eric having a seizure while using the equipment can pose a danger to him and everyone around. This in my view limits them from being capable of obtaining the position of jackhammer operator.
In closing, the first section was a discussion on both what type of business entity the business model of Lou and Jose should have with their restaurant/bar which was addressed as a general Partnership and the other business model as an extermination business by Frank which was thought to have a sole proprietorship. Each model was described to have certain characteristics pertaining to why each entity was right for that model. There was a discussion on the factors in starting a business in relation to laws and regulation each business model should consider. In the second section it was a discussion on a construction scenario in which I described the elements of what was going on and how laws and regulation will play a role on the decision to be made. References
ExpertHub.com. (2011, Spring). www.smallbusinesslawfirms.com. Retrieved from http://www.smallbusinesslawfirms.com/resources/business/business-structures/chossing-right-business-entity.htm U.S. Securities and Exchange Commission. (2010, January). Securities Act of 1933. Retrieved from http://www.sec.gov/about/laws.shtml