Bus 415 - Business Entities, Law, and Regulations

Business Entities, Laws, and Regulations

Stacey Nicholas

BUS/415 Business Law

Andrew McAdams

November 7, 2011

Business Entities, Laws, and Regulations

New business will create jobs, products, services, and the possibility of economic growth for the area that the business opens. Entrepreneurs open new business on a daily all over the world. An entrepreneur is “a person who forms and operates a business” (Cheeseman, 2010). Entrepreneurs can start a business own their own or open the business to others as investors or co-partners. Most business start out small and those that thrive above and beyond expectations will grow significantly. A new entrepreneur must first decide on the “type of business organization that they want to use, whether it is a sole proprietorship, general partnership, limited liability partnership, limited partnership, limited liability, or corporation” (Cheeseman, 2010). These new business owners must consider factors such as: capital requirements, cost of formation, government restrictions, tax considerations, and personal liability before starting their new business. There are a couple of scenarios that must be evaluated to determine the best suitable business, help to identify laws, regulations, and the risk involved for each scenario.

Restaurant/Bar Scenario

Lou and Jose are planning to open a sports bar and restaurant. There intentions are to have a place where customers can socialize and watch their favorite sporting events on large-screen TV’s. Lou and Jose do not have enough capital to start their business. However, they do have a wealthy friend (Miriam) who does not have the time to help with the operations of the business but would like to provide capital to help them start their business in return for a percentage of ownership. Lou and Jose should open their business as an LLC. An LLC is “an unincorporated business entity that combines the most favorable attributes of general partnership, limited partnership, and corporation” (Cheeseman, 2010,).

An LLC is a separate legal entity and entrepreneurs can form LLC’s only by the laws of the state in which they are organized. An LLC company is regulated in their formation, management, and dissolution. An LLC is taxed as a partnership unless Lou and Jose decide to be taxed as a corporation. One or at least two members, depending upon the state that the business resides in, may form an LLC. By law they can only organize their LLC only in the state in which they are doing most of their business, but they can conduct business in other states.

Lou, Jose, and Miriam should create on operating agreement that will