Legal Forms of Business and Development Legislation - Essay Example

Legal Forms of Business & Development Legislation Insert Name Institution Table of Contents 1. Executive summary 2. Legal forms of business ownership 3. Corporation 4. S Corporation 5. Limited liability Company 6. Sole proprietorship 7. Partnership 8. Development and building approval processes 9. Principal certifying authority (PCA) 10. The certification process 11. Complying development certificate 12. References List Executive summary This paper provides an in-depth and comprehensive coverage of legal forms of business ownership and expounds on development legislation. In fact, sound advice on what legal form of business to assume for a particular business is critical. The decision of what on Legal form of business ownership one can opt to pick for his or her business is primarily based on the size and nature of the enterprise. In this case my client to build a building company. Since the building and construction industry is quite complex and procedural it is apparent liability is anticipated. Thus, I strongly believe my client would be best suited to opt for a legal form of business ownership that is favourable for minimal liability and an independent entity that can be sued without the owner being affected to protect him or her from personal exposure. In this scenario the corporation legal form of business ownership would serve my client right. In the Australian construction and building industry, there are concrete regulations and standards that must be adhered to for a plan and a building to be approved and certified. To put up a new building or repair an existing one, a developer has to acquire a development approval and a construction certificate. However, this is a lengthy procedure and takes quite a lot of time hence one has to invest time. Nevertheless, once a developer sends an application for development approval to the authorities an approval is granted if the intended construction meets the regulations and standards of the Australian building code. It is crucial to acquire a development approval since it is after it is granted that one can acquire a construction certificate, without which a building cannot be certified and may end failing to acquire an occupation certificate. An occupation certificate, which is granted after procedural inspections is mandatory in order for a building to be used for accommodation otherwise the investment would be a waste of time and resources. Legal forms of business ownership It is fundamental to make an informed choice when choosing a legal form of business ownership since a particular legal form has its limitations and advantages. Therefore, arriving at the most appropriate choice of a legal form for your business is absolutely critical. Depending on the legal form of ownership a business takes, various aspects of legal compliance must adhered to whereas some taxation privileges such a tax exemptions are available. In addition, a particular legal form of owner for a business has a given protection or vulnerability of liability to its customers (Fred, 2012). In fact, making a decision on what legal form of ownership to take is a challenging task since there is a wide range of simple and complex legal forms in existence. However, once you have an understanding of principles governing the various legal forms as well as their advantages and disadvantages facilitates making a choice of what legal form to take. First, there four forms of legal ownership which a business can take. The four legal forms of ownership for a business are: Corporation S Corporation Limited liability Company Sole proprietorship Partnership There is no particular form of legal ownership for a construction company, but the choice will be determined by the nature of business that your company seeks to pursue as well as the size of our company since it is appropriate to choose a form that has the least liability for your business. Below is a comprehensive outline and analysis of the e four legal forms your business can take (Fred, 2012). a) Sole proprietorship This legal form of ownership for a given business involves a business with an owner whereby the owner is the business. In most cases, Sole proprietorship is quite common. This form of arrangement, sole proprietorship does not separate the business from the owner but adopts a different name that represents the owner to his/her clients. In essence, the business and the owner are legally inseparable. Thus, this relationship between the business and the owner renders the sole proprietor a pass-through entity. This implies that the entire profit generated by the business as well expenses incurred by the business are filed directly as part of the proprietor’s personal income and expenditure. Therefore, if the business incurs a loss, the owner will consequently suffer a deduction to offset personal income. Conversely, if the business generates profit for the owner, he is liable for tax deductions. Sole proprietor legal of business ownership is easy to form and manage since they have few legal requirements. Consequently, they are quite affordable given that there is no requirement to file legal documents in most business activities. The process of forming a sole proprietor entails a business owner acquiring a business license to begin operating the business legally. Though a sole proprietorship has the advantage of simplicity thee some drawbacks that might steer clients and investors away from this form of business ownership. The main disadvantage of sole proprietorship business ownership is rooted in its nature, which leads to three main problems (Fred, 2012). First, the business owner may lose some worthwhile tax-free benefits simply because they can not take part in company-funded employee benefit plans such as medical insurance and pension plans. Second, whenever the business is sued, the plaintiff actually sues the business due to their inseparable nature. Thus, the owner’s exposure to liabilities related to the business is unlimited. Lastly, the owner is liable for debts of the business and personal assets can be seized to compensate business obligations. b) Partnership This legal form of business ownership has some similarities to sole proprietorship, but more than one owner. In comparison to sole proprietorship, the business owners in partnership are similarly inseparable from the business. It is a legal form of ownership is a legal entity that refers to the owners hence inseparable. In deed, partnership carries along similar advantages and drawbacks as sole proprietorship. Nevertheless, a partnership comes with an additional shortcoming in that a partner can be held liable for activities of other partners hence this increases personal liability. The main advantage of a partnership form of business ownership is that tax treatment is quite different. Even though this legal form of ownership is a pass-through entity, the partnership files an informal tax return with the IRS. The pro-rata dividend of the business income and expenses are expressed on each partner’s individual return while the taxes due are paid by the associates (Fred, 2012). c) Corporation This legal of ownership was derived form the partnership legal form of ownership with an aim of resolving the problems that arose from such business organization. Incorporating facilitates several entrepreneurs to act as a single entity similar to a partnership, but has more advantages that a partnership legal form of business. The main of this legal form of business is that the corporation is a separate legal entity that can be sued hence it is separable from the owner. Thus the corporation absorbs the liability in case a plaintiff sues the business. Corporation has become a suitable legal form of business ownership especially in recent times since it serves a major in tax reduction. In fact, the nature of corporation enables entrepreneurs to form a separate legal entity with the permission of the state that is managed on behalf of the shareholder under his or her control. Thus, this separation between the business and the owner offers a legal distinction and gives the business owner the following advantages: a) It allows the owner to hire himself as a worker of the company and participate in benefits plans such as company-funded medical insurance and pension plans. b) Given that the owner and the business are two different legal entities lawsuits are addressed to the company instead of the owner c) Whenever debts are incurred in the name of the business, the liability is for the company to settle and the owner is not directly liable hence his or her assets cannot be taken to compensate company obligations. d) S Corporation This legal form of business ownership is similar to a corporation. However, there is a main difference that is, the business is given a privilege to be taxed as partnership. The business owner is required to file a special file referred to as IRS Form 2553. Once the S corporation status is granted, the business operates with the advantage of being taxed as a partnership. Nevertheless, all other aspects of the business are similar to those of a corporation (Fred, 2012). e) Limited Liability Companies A limited liability company is the most modern legal form of business ownership. In essence, it a legal form that combines favorable aspects of both corporations and partnerships. This legal form of business ownership focuses on pass-through taxation and limited liability of the company. The nature of a limited liability company legal form is that the company is taxed as a partnership and offers the business limited liability protection. Thus, the main advantage of a limited liability company business organization is limited liability protection. However, this has it shortcomings. First, legislation regarding this legal from of business ownership is ever evolving since it is modern form. Second, the treatment of tax as partnership nullifies company-funded benefits. In this case I would recommend that you take on corporation legal form for your business. In my opinion the numerous advantages that this legal form offers makes it the most suitable choice for your business since you are protected from exposure and it is a legal entity that is in a capacity to be sued. In fact, you as the owner will have the opportunity to employ yourself as the president of your business and benefit from company funded benefits such as pension schemes and medical insurance. In addition, the business is liable for any debts and your assets are protected since they cannot be seized to pay for company expenditure (Fred, 2012). Development and building approval processes Development approval is needed for new structures and buildings and demolition or renovation of existing structures and buildings. This process enables the Council to evaluate a proposal against existing regulations and ensure that the development is suitable within the desired location. In addition, the Council assesses the development for violation of the neighbours’ rights such as privacy before the project can be initiated. A development application (DA) is a request for permit to implement a proposed development. A development approval is made up of two facets that is, a planning consent and a building consent. These are provisional planning and building proposals. In most cases, a development requires that the developer acquires a development approval and a construction certificate. However, for some developments council approval is not needed and be implemented without a construction certificate. A development approval can only be issued by the Council, but a construction certificate can be granted by the council or any recognized certifying authority (city of Sydney, n.d). Complying development certificate The sole purpose why the certifying process is in existence is to ensure that construction activities are compliant with relevant regulations and standards such the building code as well as other fundamental Australian standards required by the council for a development to be approved. Alternatively, a developer may apply for a complying development which is a combination of the development approval and the construction certificate. A developer can apply for a complying development in cases where the proposal meets a set of predetermined standards gas long as the location of construction is not within areas deemed as environmentally sensitive by the council. There are three major steps in the certification procedure. The first step requires the developer to obtain a complying development certificate. This is mandatory since no construction work can commence before the developer has been granted a construction certificate. In fact, a developer cannot acquire a construction certificate unless he or she has been issued with a development approval. A complying development is granted either by the council or a recognized certifying authority. The design and specifications presented with a construction certificate must contain adequate details to guarantee that works are compliant with Australian regulations and standards as well as consistent with the terms and conditions stipulated in the development approval (Maitland city council, n.d). The certification process The second step in the certification process involves nomination of a principal certifying authority (PCA) by the developer. As soon the developer acquires a construction certificate he or she is required to notify the council what principal certifying authority they have chosen. The mandate of the certifying authority is to make certain that development is implemented as per the standards and specifications and plans presented with development approval certificate (David, 2008). The principal certifying authority supervises the construction to ensure that it has been built to the standard of the Australian building code. Indeed, the principal certifying authority must scrutinize the construction work at scheduled stages to ascertain compliance with mandatory standards. In case, a develop fails to observe these inspections at the scheduled stages of the construction work, negative consequences such as refusal by the council to permit occupation of the building. It the responsibility of the certifying authority to give details of the designated stages in which inspection is to be done when the complying development certificate is granted. Nevertheless, it is required that the principal certifying authority remains the same throughout the construction process to facilitate uniformity in inspections (Nicole, 2011). Complying development certificate The third step in the certification process involves obtaining an occupation certificate. The developer is required to acquire an occupation certificate from the council before the building can be occupied. Nonetheless, for an occupation certificate to be issued, all compulsory inspections must have taken place as well as the final inspection. In addition, the completed work must have met the conditions of development approval or else occupation certificate may not be issued. Once the developer has sailed through the planning consent, it is time to embark on the building consent. The council determines whether the proposal meets technical building necessities and whether it will be structurally sit in accordance with the endorsed plans. The evaluation is made against the building code of Australia. This responsibility may be carried out by either an approved certifier or the council. In case the proposal in the application meets the set standards, permission to implement the plan is granted (Alexandrina council, n.d). In conclusion the development approval process facilitates management of the legality and standards of construction works. Reference List Alexandrina council. The Development Approval Process.Retrieved from http://www.alexandrina.sa.gov.au/webdata/resources/files/The_Development_Approval_Process.pdf City of Sydney. Planning and building approvals.Retrieved from http://www.cityofsydney.nsw.gov.au/development/DevelopmentApplicationGuide/PlanningAndBuildingApprovalsInNSW.asp David, E. J (2008).Residential Land Development Practices:A Textbook on Developing Land Into Finished Lots. ASCE Publications. ISBN0784409676, 9780784409671 Fred, S (2012). Legal Forms for Starting & Running a Small Business. Nolo Publishers. ISBN 1413316832, 9781413316834 John, R. N (2006).Compendium of Land Use Laws for Sustainable Development. Cambridge University Press. ISBN 0521862175, 9780521862172 Maitland city council. Development approval process. Retrieved from http://www.maitland.nsw.gov.au/PlanningDevel/DAApproval Nicole, G (2011). Australian Urban Land Use Planning: Principles, Systems and Practice. Sydney University Press. ISBN1920899774, 9781920899776 Read More