Paper Example on Comparing Business Organizational Forms: Partnerships, Corporations, and LLCs

Introduction

In business law, there are set codes of conduct that are followed to ensure that all business ethics are followed, as clearly stated in the business agreement and the business plan to be executed. There are different types of business setups, and one has to make a wise decision on the type of business to venture into. Having a plan to start a business and execute our business idea, we couldn't agree on the type of setup our business could take due to different misconceptions about the different types of organizational forms. Each business organizational form has its impacts, especially when the business is new. We visited our Attorney to get more information on the pros and cons of the different types of partnerships in business and incorporate business. The Attorney responded well to our questions.

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PART A

TAX REMIFUCATIONS CONTROL CONSIDERATIONS LIABILITY EASE EXPENSE OF FORMATION TRANSFERABILITY OF OWNERSHIP EASE OF EXPANDING THE BUSINESS

General Partnership All general partnerships do not have documents requesting the payment of taxes, but the members of partnerships pay income tax because their income in the partnership is taxable. Profits are taxed as ordinary income to all partners the same way the losses are shared equally. Enables participants to participate in structuring and controlling the business effectively. All have equal control over the partnership, and these can only be changed upon agreement by the partners. Partners have unlimited personal liability, and the partnership offers liability protection from the partnership in case of loss in the business. Because general partnerships are not formed through a state filing, they are not required to pay a formation filing fee, ongoing state fees, or franchise taxes. The partnership must still obtain the business licenses and permits required for operation. The partners' agreement between themselves determines this. There is an ease in the transfer of ownership since it is the partners who agree on what to do in the business after a partner's agreement. It is non-transferable. As it has ease of formation and closure, a general partnership is easy to expand because all partners are always involved in decision making, thus makes it easy for the partners to grow the business, thus making the business not easy to transfer.

Limited liability partnership It is a flow-through entity in the taxation process. The partners are paid untaxed profits. Thus they don't get taxed There is a limitation of partners. Not only can any partner control the partnership, but they have a selected member to lead the partnership; thus, limited partners cannot take part in the management of the partnership. Partners have limited liability. Allows partners to enjoy tax benefits and liability securities on capital contributions. It is non-transferable since all partners are involved in business ownership and management and have equal power over the business. The requirement is to pay fees to the states and registrar of companies to be allowed to carry out activities within the country.

Public corporations' profits over the business are taxed according to their income and other payments in the form of dividends are also taxed following the general income. The profits are taxed the same as income. There is no total control over the decisions made by the business daily. Only those in charge are allowed to control the business since there is no separation from who is allowed to manage it. There is limited liability for the company and its holdings. It is a separate legal entity, and each shareholder has limited liability. The company has to adhere to certain legal formalities to be allowed to perform its operations. The company must be registered and pay some fee to the states and must receive a charter from the states to begin operations. It is limited, and the company's ownership cannot be easily transferred unless there is an agreement between the shareholders. It is easy to expand after consulting each shareholder in the company. All are always allowed to [participate in giving directions to the company on what is to be done, making it easy for the company to expand its activities.

Sub-Chapter S Corporations It is also taxable in terms of income the same as other partnership companies or corporations There is no overall control by the management of the daily activities of the corporation. Liability is limited, especially when there is a loss of capital that was a contribution to the organization's planning. Must follow the rules by the IRS to avoid losing the charter of operation. They have to pay some fee to the states to get a charter that allows them to operate effectively. There are more shareholders in the corporation, and all have equal powers in the ownership of the company. They are all allowed to give directions in the company since all have equal ownership over the company. They have to follow the rules by the IRS to be allowed to expand operations in the state. For more than 35 shareholders, shares may not be issued.

PART B

All partners in a general partnership have equal rights and responsibilities. We had the idea of forming a general partnership to perform business operations towards making our partnership a success. A general partnership is a business engagement by which two or more individuals agree to share in all assets, profits, and financial and legal liabilities of a jointly-owned business. These duties and rights of every partner make operations in general partnership a success. The duties and rights include;

Entitlement to full care and disclosure in the partnership

When managing the business, partners have to behave carefully to ensure that they safeguard the company's reputation, especially to the public. In being careful with the company's activities, members have to place proper record keeping techniques and good memorability to ensure that all the company's documentation of operations are safe and there is condor (Nancy, 2016). All partners should always consider full disclosure of duties concerning sales in the company.

Loyalty and utmost good faith between the partners

The duty of loyalty and good faith among the members always extends to the dissolution and complete settlement of business affairs for the successful execution of the company's policies. All the activities that every partner participates in always depend on loyalty and faith among them because they dictate what is to be done and how what is done will help the company ensure that the partnership gets better results primarily from the public. If there are conflicts among the partners, they are expected to disclose the conflict and get help from other partners to help in solving the conflict amongst them.

Right to fiduciary duties

This is an essential duty to all partners in a general partnership. Each partner is entitled to the duty to act or perform operations in the company's interest. General partners are responsible for executing operations in the company and providing essential services that lead to the success of the company's set goals and visions. Fiduciary duties in the company depend on the reasons for operating the business and what each partner is expected to do to ensure that all the company operations are met, and none is left pending (Nancy, 2016). If any does something against the company's set codes of conduct, the partners may be found liable for breaching trust among the members. This is against the business law governing partnership entities.

All partners have an equal share of the partnership's profits. In most cases, this is a verification made in the partnership's agreement that guides the partners to perform their duties and benefit from it.

As partners, all are entitled to act towards the benefit of the partnership in all times to ensure that what the partnership achieves is through the effort of all parties in the partnership. The Attorney states that for a partnership to be a success, all members must ensure that they perform all their duties wisely without violating the partnership's set principles. Acting wisely ensures that a business is thriving, and nobody gets to regret forming a partnership with other partners. There are agreements as specified by the Attorney in charge of companies. The agreement states that:

• A partner should not put funds that belong to a partnership into a personal account.
• Profits should be held and disbursed equally to all partners during allocation.
• A partner should not act on behalf of the partnership without consent from other partners because this might lead to the arising of confusion in the company over time and lead to a loss of trust among the partners.
• Informing other partners of any action a partner undertakes individually on behalf of the company.
• Reimburse partners owing to the partnership debts to avoid unbalanced summations of the company's accounts.

PART C

In the short video, opening a limited liability company (LLC) accounts for the first resource on the utility type that the corporation deals in. The corporation has tax advantages because they are taxed at the corporation level. At the individual level, a limited liability company is considered a hybrid business due to injections into the business after formation (Business, 2015). The video also states that all enterprises registered as limited liability co-corporations attract investors and allow the management to assign or issue a share of ownership to both investors and shareholders. The corporation can quickly go public since there is easy access to resources.

In most cases, the taxes pass through the owners' hands, putting them in a position to account for how their taxes are used and how they are expected to operate as a limited entity (Business, 2015). LLC is considered easy to maintain than a corporation because it can be well-suited for single owners and partners. In contrast, corporations are just suited for partners and have no space for single owners.

LLC is advantageous when compared to corporations. Corporations have a strong liability shield for individual assets. A drawback of cooperation is that there is double taxation at both individual and corporate levels. Many people don't like forming corporations because there is no ease of decision-making. LLC gives one a corporation liability shield and flexibility in terms of how one has to pay taxes; thus, it has a tax advantage of saving on taxes. Unfortunately, LLC is not suitable for going public or associating with big businesses because it's flexible and can change anytime.