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The Legal Environment: Memo To Gloria Smithson's Case

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You decide: Memo to Gloria Smithson DustinLee C. Foster The Legal Environment Professor: Melanie Morris DeVry University January 21, 2017 Memorandum TO: Gloria Smithson FROM: Dustin Foster DATE: January 21, 2017 RE: Advice on which business entity best suits Gloria Smithson objectives. Issue: Gloria, In reference to the best business entity to suit your objectives and reduce liability to protect your widget and family. I have outline the three best options below as well as my personal recommendation of which is the most optimal entity. Facts: Sole proprietorship: I feel like we have to discuss this option first so that you are aware of benefits as a sole proprietor. With this form of business, you are the business. …show more content…

There are obvious disadvantages here also, all funds come from, and are limited to your personal accounts. Likewise, the owner is responsible for all contracts and torts that employees make. Lastly the sole proprietor has unlimited personal liability for all debts and obligations (Cheeseman 459). General partnership: this entity requires two or more owners, in a general partnership you do not have to pay federal taxes also in a partnership owners can sign a right to participate in management or can decline too. Which let you make the decisions and your partner would just collet his share of the profits. Advantages: • Business obligation split between owners • Entitled to indemnification for personal expenses. • Right to accounting, legally award collaborates their share of assets in case of fallout or disagreement. The disadvantage here is the fiduciary commitment required and obligation to partners in profit and obligation. You lose direct decisions power in you company. Likewise, general partners have unlimited liability to debts. With the right partners this can be beneficial but, if not screened well and disagreement arise it could end up costing you your business (Cheeseman …show more content…

In addition, individual partners are not personally responsible for company debts or other obligations (Bayern, 2016). • The partnership itself is not responsible for paying taxes. The credits and deductions of the company are passed through to partners to file on their individual tax returns. Credits and deductions are divided by the percentage of individual interest each partner has in the company (Bayern, 2016). Disadvantages can come up with certain states and the tax requirement. Some states file you as a non-partnership, LLLP are not recognized in other states. You will have to make sure wherever you establish your business it is legally recognized (Florida Bar Journal, 2013). Recommendation My professional recommendation for you; with your situation is the last entity (LLLP). I suggest you enter an agreement with Roger and Nancy, since they are venture capitalists, and you wants to remain insulated from personal liability for debts of the business or liability in the event of injury caused by the widget. This entity will asset you best because as venture capitalist they have substantial funds to invest in the widget business and already have confidence in your design. The LLLP covers both partners liability thus protecting you and your

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