BUS670 Legal Environment
Professor Janet Fiorentino
February 17th, 2013
Liability Exposure in Business
Creation of a business of any type has to fall under a particular organizational form. There are many elements to starting a business a future proprietor should consider, such as degree of forms and applications that need to be filed, state and federal, legal liabilities, level of difficulty in the formation of a business, and level of taxation that is involved.
In this paper it will examine, the different types of organizational form that help define the rules, limitations and liabilities of a business. The five main structures are sole proprietor, general partnership, limited partnership (LP), corporation, and limited liability company (LLC) . Organizational Forms
One of the first decisions that must be made by anyone seeking to establish a new business is what organizational form to choose (Seaquist & Coulter, 2012). Table 1-4 provides comparison of some of the benefits and liabilities each of the five organization forms. [pic]
Under this form of business organization, the owner of a business personally operates and is solely responsible for all aspects of the enterprise (Seaquist & Coulter, 2012). This type of organizational form, the proprietor has to assume the majority of the liabilities, taxes and management of the business. One law does protect the solo proprietor in regards to liabilities. Under the law of agency, principals can be bound by the authorized acts of their agents and are liable for the negligent acts of their agents committed during the course of the agency. Sole proprietors, however, need never worry about being responsible for the bad judgment, negligence, or bad faith of a co-owner, since they are the only owners; they are responsible only for their own acts and for the acts of their agent (Seaquist & Coulter, 2012). General &...