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Business Entities, Laws and Regulations

Essay by   •  June 5, 2011  •  Essay  •  1,317 Words (6 Pages)  •  1,810 Views

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2011 Business Entities, Laws, and Regulations When an individual or a group of people decides they want to start a business, there are some considerations that need to be address if the business is going to be successful. The new business owner or owners will need to evaluate the type of business entities that will be most affective for the business that is being formed. In this paper, there are three different business case scenarios to be evaluated. In each scenario, the business owners will identify the potential risk, regulations, liability, and taxation issues and make a decision as to which business entity would be the best choice for the business. Extermination Business Frank is considering opening an extermination business and growing it as a chain throughout the United States, and as a wealthy investor it is important for Frank to identify which business entity is appropriate to form the business under. Frank might consider opening the extermination chain and retaining all ownership and liability; he could affectively operate the business as Sole Proprietorship. If Frank pursues this option, this would not be in the Franks best interest because of the possible exposure to Frank's personal assets if the business fails. Frank's strategy should be to establish the business as a corporation. Frank should chose between the C-Corporation and S-Corporation, they are similar in terms of their operational format but slightly different in the way the entity format handles the taxation process. The recommendation would be for Frank to select the S-Corporation to avoid double taxation of the revenue produce from the business. Filing articles of incorporation with the Secretary of State for the business forms a corporation. In order to define a company or business as an S corporation, the organization has to file Form 2553 with the Internal Revenue Service within a specific timeline (Cheeseman, 2010). In the event Frank fail to file the proper paper work within the timeline allotted, the corporation will automatically be regulated as a C corporation. Similar to partnerships, S corporations have no entity level taxation, and are only taxed on the business income. Therefore, employment taxes are not paid on the shareholders' dividends, but only on the shareholder's designated salary regardless of the C-corporation or S-corporation status of the business. The advantage of establishing a corporation, will give Frank the ability to offer franchising through the chain of extermination companies, which offers Frank the ability to expand the business faster without the additional costs of re-establishing individual companies under the corporation. This would give some direct protection against individual chain business failure and the costs associated with it. The liability for Frank in this business scenario is the loss of the investment funds regardless of the business entity he chooses. However, as stated above, the sole proprietorship offers no protection over Franks personal assets and in the event of the extermination business fails, the people he owes money to can lay claim to those personal assets. Construction Scenario As the hiring manager, Mei-Lin will have to determine the best candidate for employment without putting the construction company at risk. The business case scenario offers some potential risks for Mei-Lin to consider. For example, age discrimination, sex discrimination, religious discrimination, color discrimination, and national origin discrimination. Here is a list of potential acts that will provide clarity and protect the employee from discrimination: Title VII of the Civil Rights Act of 1964, Civil Rights Act, Age Discrimination in Employment Act, Equal Pay Act, and American Disabilities Act (Cheeseman, 2010). Mei-Lin will need to determine her options carefully and make decisions that will not affect the business negatively. Michelle, 35 years of age, appears to be pregnant, has a high school diploma, and a former employee of Jackhammer. Not selecting Michelle, if she is the most qualified for position, cannot occur under Equal Employment Opportunity (EEO) regardless if Michelle is pregnant

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