Limiting liability exposure
A clear understanding of business legal environment ensures that the executives are well aware of the liabilities of the shareholders of the business entities.
Sole proprietorship
It is the cheapest and straightforward form of business that can be created by any person. This is because its creation only requires the business name creation and obtaining the various licenses from the relevant authorities. Of all the forms of business forms, it is the simplest and requires little capital in creation. Its main disadvantage is that all the liability is borne by the owner of the business. That is to mean that in case of any issue that arises for example the business being sued, the owner is personally responsible/ liable(Miller &Jentz, 2011). In this case of Tinker's Home Security Servicebeing a sole proprietorship business, the owner stands to lose his/her personal assets in case of any damages that could result from the litigation.
General partnerships
A partnership refers to the business relationship created by two people or more in an agreement based on the profit making ideology. For the general partnership, there is equality in all aspects of the business. It simply means that the general partners normally possess equal powers with regards to management, expenditures, decision making and the day to day running of the activities of the business(Marson, 2013). The agreement during the formation on the various operations of the business are specified on the onset of the business. However, any decision made by one of the partners is binding to all and this means that in case one of the partners makes a decision that is detrimental, all the partners will share the poor outcome that result out of it(Marson, 2013). That is to say, the liabilities if the all the partners in the general partnership is unlimited and all of them are liable in case the business runs into debt. In the case of Tinker & Tailor's Home Security Service General Partnership all the general partners will be liable in case there are any charges from the breach of contract litigation.
Limited partnership
In the event that the Tinker & Tailor's Home Security Service General Partnership is the form adopted, the liability is only to the general partners. It is due to the fact that the silent partners responsibility is only in their investments and they do not engage in the day to day running of the activities of the business. Many a times, individuals join the limited partnership form of business in a bid to avoid the exposures to personal liability. The actions of the individual partners are merely likened to those of shareholders of corporations(Miller &Jentz, 2011). In our case, the Tinker & Tailor's LP Company, the only liable parties for any damages as a result of the litigation will be the general partner while the liability exposure of the silent partner's is strictly limited to investment or the capital contribution injected during the start up.
Corporation
Corporations are considered different entities from the shareholders possessing rights such as, owning their property, ability to take loans from financial institutions, protection of the law similar to the citizens and the ability to sue and be sued by other parties. Corporations are also obliged to pay taxes and can also sued for crimes if found guilty. The advantages of having this form of business is that it protects the individuals from personal liability and legal responsibility. Also, the shareholders stand to gain even without engaging in the day to day activities of the corporation(Turner, Gamble, French &Muurlink, 2012). The corporations also have a wide range of tax advantages with the inclusion of pensions and better options for the profit share.
On the other hand, the corporations are expensive to form in addition to the complex tax codes that require professionals to complete. Also, the shareholders have little say in the daily operations and management of the corporations. Based on the Tinker & Tailor's case, the corporations are the best protected in the breach of contract litigation.
Limited Liability Corporation
The LLC's are simpler to form than corporations as they are hybrids of the combination of all the other forms of business. The owners of the LLC's are protected from personal liability. Their establishment is also informal and is likened to the formation of both the sole proprietorships and the partnerships. Their taxation process is simple and also being that they are formed under the corporate shield, their liabilities is borne by the organizations and not the individual s who take part in the formation(Turner, Gamble, French &Muurlink, 2012).
From all the business forms, the corporations are the best form of business that limit the liability exposure of the owners. On the other hand, the partnerships and the sole proprietorships leave the owners vulnerable to the effects of the lawsuit concerning breach of the contract.
From the case, we can conclude that an understanding of the underpinnings of business law is vital towards the success of the forms of businesses. With a clear view of the requirements in formation and operation of the businesses, the leaders can make the best choice that best maximize their investment opportunities as well as adequately avoid the costly effects of litigations in the event that they arise.
Business description
In times to come, I plan to own an IT firm offering product authentication services to producers in various industries. Its operation will be based on mobile platform with an app that will send instant messages to the customers confirming the authenticity of the products after they send certain codes that my technical team will generate and place in each of the products. The service will be on a large scale as my target customers are spread across all the states.
The business form I will take will be a limited liability corporation since it has limited personal liability exposure since it is under the corporate shield. The management will be under special trained personnel in the various fields placed on the basis of merit. This will ensure that competence is adhered to in all areas of the company. Also, the formation will be easy as it is under the corporate umbrella and the formation procedures are informal making all the procedures of formation a bit easier. The taxation procedures of the corporation will be less complicated thereby making it easier to comply with the various tax obligations as stipulated by the government.