Business Entities, Laws, and Regulations Paper
The following paper includes the consideration of control, taxation, and liability issues for two hypothetical businesses as well as legal, regulatory, and risk issues each of the two businesses may face. Also included in this paper is a hypothetical hiring manager scenario in which the hiring manager must choose from numerous applicants who possess various levels of qualification, experience, and education. An applicant must be chosen from the pool of applicants based on the advertisement placed for a jackhammer operator and any legal or regulatory issues to be considered for each applicant.
According to the scenario, Jose and Lou plan to open a sports bar with the capital investment from Miriam. In this scenario, the three individuals can form a general partnership with all three owning the business. Miriam would be the investing partner with Jose and Lou being the managing partners. Miriam will allow Jose and Lou to control the business and Miriam shares in the business profits. The formation of a general partnership is achieved by meeting four criteria. The criteria are it must be an association of two or more people; those people must be carrying on a business; they must be co-owners; and the business must be for profit. Miriam, Jose, and Lou would be co-owners of a for profit business, a restaurant/bar, thus meeting the four criteria and can form a general partnership.
Taxation of general partners is accomplished on each individual partner’s personal tax return because partnerships do not have a tax liability. A partnership must file an information return with the government explaining the income, or losses, incurred by the partnership (Cheeseman, 2010, p. 255, pp. 2). The reason for an information return is for the government to trace the partners’ income tax returns for correct reporting of income from the partnership.
Liability issues the partners must consider when forming a partnership are tort liability, contract liability, and liability of incoming partner(s). Tort liability affects all partners if the lawsuit is the result of actions performed by one of the partners. The partnership is liable for any negligence, breach of trust, breach of fiduciary duty, defamation, fraud, or any other intentional tort (Cheeseman, 2010, p. 256, pp. 2). Contract liability affects all partners because of agency agreement. Partners are agents of the partnership and therefore any agreement entered into by one partner is also entered into by the other partners through the general partnership. Partners are jointly liable for contracts and debts of the partnership (Cheeseman, 2010, p. 257, pp. 2). A third party suing the partnership must name all partners in the suit or all partners, and the partnership, are free from collection of a judgment. Therefore, by naming all partners, and the partnership, in the lawsuit, a third party may collect a judgment from any or all of the partners or the partnership. Liability of incoming partners is limited to the investment of the incoming partner for existing debts and obligations. Liability for debts and obligations incurred after becoming partner is equal to that of the other partners.
Laws and regulations the partnership must follow would be the application for, and receiving of, a liquor license to serve alcoholic beverages and liquor by the drink. Also necessary would be the adherence to all health regulations and codes required for a restaurant. As a partnership, the business would also need to have in writing who is responsible for certain activities. Risks the partnership must prepare for would be the loss of investment capital by Miriam, who should have a written contract with Jose and Lou that all partners are equally liable for losses and profits. Equal liability covers all partners from carrying the bulk of the financial loss...