Explain The Legal Underpinning Of Business Law

| The partners are jointly and severally liable for business debts and obligations. The partners are held personally responsible for the business and may be sued personally for liability. Partners’ personal assets are subject to lawsuit(s) made against the business. Lack of continuity; death of a partner may end the partnership/business if a buy/sell agreement is not in place. Disagreements may be difficult to resolve.

Due to its nature, partnership is generally liable for the acts of the individual partners if committed in the course of the partnership business. However, liabilities of every partner may be regulated by the written agreement signed by partners. If no written agreement is signed by partners, liabilities of the partnership are regulated by the Partnership Act. If one of the partners retires, he or she may not be liable for the future debts of partnership if an official notice of the change is sent to creditors and the public. However, there were no official notice sent by the partners in the case; therefore, Toby may be liable for the debts of partnership. Due to the death of the third partner, partnership may be dissolved. In order to pay off the debts, assets should be sold and partners are free to continue the same kind of business after the dissolution of the

General Partnerships are not without their disadvantages. Without being an incorporated company the owners are still subject to issues such as liability, control, and location issues.

Liability All liabilities are the responsibility of each partner. In the event of litigation, any creditors can go after the personal assets of each partner to recover any debt owed. But since liability is spread out between the owners, one may feel less risk is being taken. 2. Income Taxes General partnership may also benefit from pass-through taxation, meaning the partners are taxed like sole proprietors. Business income is reported on the personal tax filing while business losses can be deducted to reduce personal tax liability. The partnership itself is not subject to federal income tax. However the partnership needs to file an information return utilizing the IRS Form 1065. 3. Longevity or continuity of the organization Once the partnership agreement is fulfilled, the general partnership may dissolve. A buy/sell agreement may be included in the articles of the partnership to allow the

Income Taxes- Taxes are paid as income tax, unless the limited partnership is classified as a corporation by the IRS for tax purposes. In order to keep from being taxed this way, you would have to stick solely to the contract as written, and keep away from operating outside of the agreement.

* The liability does not fall on one individual instead it is assumed by the business in a corporation. Individuals representing the company can still be personally sued in some states.

Limited Liability Company (LLC) combines the tax advantages of a partnership with the limited liability aspects of a corporation. LLC’s are governed by the Uniform Limited Liability Company Act (ULLCA). All members of the LLC enjoy limited liability unless there is serious misconduct is committed by said member(s), or a member fails to follow through on an obligation. All this should be outlined in your preformation contract. You will have more flexibility with taxation and options on how to manage the company. It would be advisable to also have an Operating Agreement. This will dictate how management will be hired and fired, division of profits, how to transfer interest in the event a member chooses to opt out or dies. What steps to take in the event of dissociation of a partner, and if it causes the dissolution of the LLC. Most importantly how the members vote in the LLC. The weight of the members vote is in accordance with the member’s capital

A dealer sold a new car to Raymond Smith. The sales contract contained language expressly disclaiming liability for personal injuries caused as a result of defects in the car and limiting the remedy for breach of warranty to repair or replacement of the defective part. One month after purchasing the auto, Smith was seriously injured when the car veered off the road and into a ditch as a result of a defect in the steering mechanism of the car.

However, this risk can be addressed by incorporating the business. There are various options of incorporation depending on the type of business and goals. The most common are the Limited Liability Company (LLC), Limited Partnership (LP), Limited Liability Partnership (LLP), or Nonprofit Corporation.

What are the advantages and disadvantages of changing the company organization from a sole proprietorship to a LLC?

The investor or partner’s liability is limited to the amount they have invested in the company. This setup typically prevents each partner from being held accountability for the wrongdoings of another partner. Limited liability partnership can be used in many fields, it is commonly used in law or accounting firms. The laws relating to an LLP differ significantly from state to state, and between countries. A limited liability partnership is a business structure designed for partners who want an equal voice in managing their business, but not an equal share of the liability. A partner in an LLP is not responsible for the debts or liabilities of the other partners. This makes the LLP a popular choice for professional service organizations such as accounting, architecture, or law firms. An LLP is a form of ownership in which all the partners receive limited liability protection. An LLP is similar to a general partnership in that all the partners can take an active role in managing the day-to-day affairs of the business.

William O. Douglas said, “Common sense often makes good law.” Well that is what laws essentially are, rules and regulations that make sure common sense is followed. One could even say that laws are enforced ethics. Laws serve several roles and functions in business and society, and this paper will discuss those roles and functions.

As a Partnership is not a legal person or entity, although it can now be sued and can sue in its own name, all partners are jointly liable under S.9 PA1890 , and liability is unlimited. Undoubtedly in the course of the

The second legal form of business is a partnership. This form of business combines the partners financial and skill resources. On the down side, it requires a partnership agreement and the partners may not always agree on important business topics. The partners are still personally liable for all debt and legal actions. This form of business could answer the skill set issues needed to start the firm. It could also allow for a low startup cost do to the partners polling their money. (Holland, 1998, para. 3)

The advantages of corporations include limited liability, indefinite life, ease of ownership transfer, and access to capital markets. Limited liability companies and partnerships have limited liability like corporations. The disadvantages of a sole proprietorship are the difficulty in obtaining large sums of capital and unlimited personal liability for business debts. The disadvantages of a partnership are unlimited liability and difficulty of transferring ownership. The disadvantages of a corporation are the double taxation of earnings and filing required state and federal reports. Finally, the disadvantages of limited liability corporations and partnerships are difficulty in raising capital and the complexity of setting them up.