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Business Entities, Laws, and Regulations Paper

Essay by   •  November 11, 2012  •  Case Study  •  1,282 Words (6 Pages)  •  1,023 Views

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Lou and Jose has decided to open a sports bar and restaurant where their customers can enjoy the atmosphere and sporting events on large screen TVs. Lou and Jose lack sufficient funds to open the business, but they do have a wealthy investor that is willing put up the capital. Miriam wants to be just a silent partner where she will provide the capital to start the business in return for a percentage ownership of the sports bar.

Within this scenario the best business option for the sport bar is to establish a limited liability company. A limited liability company (LLC) is an unincorporated business entity that combines the most favorable attributes of general partnerships, limited partnerships, and corporations (Cheeseman, 2010, pp 267). The taxation of an LLC is taxed as a partnership and not at the entity level. Any income or losses are reported at each of the owners' individual income tax returns which helps avoid double taxation.

Under the Uniform Limited Liability Company Act (ULLCA), it provides comprehensive and uniform laws for the formation, operation, and dissolutions of LLCs (Cheeseman, 2010, pp 268). Lou, Jose, and Miriam will need to file articles of organization to form the partnerships LLC. The articles of organization must file appropriately to obtain the benefit of limited liability. The articles of organization must have pertinent information such as the LLC's name, duration, and also the wording of LLC. It can be spelled out or abbreviated.

Then an operating agreement should be establish between the members of the LLC. The operating agreement will regulate the affairs and governs the business of an LLC and also relations among all the members and managers that are associated to the LLC.

All members under the LLC will have certain liabilities. Lou and Jose will have unlimited liability because they are responsible in running the operational aspect of the company. The general rule is that members are not personally liable to third parties for the debts, obligations, and liabilities of an LLC beyond their capital contribution (Cheeseman, 2010, pp 269). Miriam will only have limited liability to the capital contribution that she put in to start the business.

Along with the formation of the LLC, Lou and Jose will need to consider the laws and legal regulations before considering establishing a partnership firm with Miriam. They will need to factor in an appropriate location for the sport bar where it does not affect the community in a negative way. Applying for a liquor license and maintaining the liquor license. Establishing a thorough operating agreement where all members understand exactly their roles and responsibilities, risks, ownership, legal issues, and etc. is key to a success of any company.

The partnership is liable for negligence, breach of trust, breach of fiduciary duty, defamation, fraud, or any other intentional tort (Cheeseman, 2010). So it is essential for all members to consult with their own legal representatives' to ensure that both sides are being protected and being fairly treated within the partnership.

Akiva and Tara have just completed all educational and experiential requirements to be licensed as obstetricians. They are planning to take out a large loan to finance start-up costs for a birth clinic. In this scenario the best option for Akiva and Tara is to establish a limited liability partnership (LLP).

A limited liability partnership (LLP) in which all partners are limited partners, and there are no general partners (Cheeseman, 2010, pp 274). With the limited liability partnership, Akiva and Tara would both be equal partner and would only be liable for obligations or debts up to their capital contributions.

Akiva and Tara will need to file articles of partnership to form an LLP and determine if they are required to carry a minimum of $1 million of liability insurance to cover negligence, wrongful acts, and misconduct by partners or employees (Cheeseman, 2010, pp 274).

The taxation of an LLP is similar to an LLC whereas all reportable profits and losses

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