Business Entities, Laws, And Regulations

Business Entities, Laws, and Regulations

Business Law/415

August 22, 2011

Business Entities, Laws, and Regulations

Businesses in every industry have to deal with entities, laws, and regulations. Managing groups have to take into consideration the control, taxation, and liability issues in the business. The idea of this paper is to discuss a restaurant and bar, professional practice, and construction scenario. For each scenario one will choose the business entity that represents the best choice for each business. Finally recognition of laws and regulations each must comply when decision-making in starting a new business, and recognize risks against which each business must shield itself will also be examined in each scenario.

Restaurant and Bar

In the restaurant and sports bar scenario Lou and Jose plan to open a sports bar and restaurant with Miriam as the investor with the capital. The best business entity choice for this restaurant and sports bar is the general partnership. According to Cheeseman (2010, p. 253) "The general partnership is a union of two or more persons to take on as co-owners of a business for profit." Partnerships have equal control determined by simple majority, unless a partnership agreement states otherwise. The general partnership is filed with the appropriate state office, usually the secretary of state office. Although Miriam is a limited general partner Miriam may want to draft a limited partnership agreement.

Under partnership law Lou and Jose control day-today affairs and are the main controllers their partnership is general partnership, but Miriam is a limited partner in a general partnership who invests money but do not contribute to day-to-day operations, but may participate in the major decisions. Limited partners give up their entitlement to participate in management and control (Cheeseman, 2010, p. 262).

Partnerships do not have a tax liability. Taxation of general partnerships is that Lou, Jose, and Miriam is taxed as individuals and not the business. According to Cheeseman (2010, p. 255) "A partnership must report an information return with the government explaining the income, or losses, incurred by the partnership." This is the way the government trace income tax returns for correct reporting of income from the partnership.

The liability of Lou and Jose is unlimited for the debts and responsibilities. This means that Lou and Jose are jointly liable for contracts and debt of the partnership. Lou and Jose are also jointly and severally liable for torts cause by negligent and breaches of trust. Miriam is a limited partner and is only liable for the debts and responsibilities of the limited partnership, which are his capital contributions to the business. Lou, Jose, and Miriam have the authority to leave and disband a partnership at any time. If the partner actions cause an unlawful closure that partner is accountable for reimbursement (Cheeseman, 2010, p. 258).

Laws and regulations the partnership must consider in a restaurant and bar are to have an understanding of securities laws as the partners organize their investor records. The partners will have zoning issues as they must make sure that they are establishing the restaurant and bar in a vicinity zoned for commercial use. Then health department regulations, the liquor licensing laws, food service certifications, sales tax laws, and employment laws, which will cover the workers. Restaurants are regulated and subject to inspection and failing to have these regulations are detrimental to a business.

The level of business risk is increased by this form of business organization. The main risk of the general partnership is that Lou and Jose is jointly and severally liable for general partners. The risk in starting a restaurant and bar business entails a large investment. Lou and Jose have to start their business with sufficient amount of money to cover mechanisms of the restaurant for at least six months. If the restaurant is unsuccessful in earning back the original investment from Miriam, this money is lost.

Professional Practice

In the professional practice scenario Akiva and Tara are licensed obstetricians and want to open a birthing clinic to continue their professional practice, and plan on taking out a huge loan to finance the clinic. The best business entity choice for this professional practice is limited liability partnership. A limited liability partnership is the same as a general partnership, but this partnership is a corporate-style limited liability. According to Cheeseman (2010, p. 274) "The partners are limited partners who stand to lose only their capital contributions if the partnership fails." The limited liability partnership is filed with the appropriate state office, usually the secretary of state office. In a limited partnership, the general partners deal with the daily operations and responsibilities and do not need to consult the limited partners for most business decisions. The limited liability partnership has the same structural and tax benefits of a general partnership. Akiva and Tara are liable to carry $1 million of liability insurance that covers misconduct, wrongful acts, and negligence by partners or employees of LLP. This condition promise that damaged third parties will have reimbursement to recuperate their injuries and is a quid pro quo for authorizing partners to have limited liability (Cheeseman, 2010, p. 274).

In starting a birthing clinic the laws and regulations Akiva and Tara must have in place is health information privacy. This confidentiality rule offers federal protections for individual health information held by covered entities and provides patients an assortment of privileges with regard to that information. Akiva and Tara should also have health information technologies standards, which are electronic health records that reduce the chance of medical error. Information securely shared electronically can impact every step in the health care process. Additional laws and regulations is HHS employment, food and drugs, fraud prevention and detection, Medicaid, and Medicare, medical, and health care, research, tribal matters, and civil, and privacy rights, which Akiva and Tara needs to have in place when starting their birthing clinic (U.S. Department of Health & Human Services,