Business Structures and Business Laws - Assignment Example

BUSINESS STRUCTURES AND BUSINESS LAWS (Student’s name) (Institution) Introduction Business is the buying and selling goods and services at a profit. Having much profit means success of the business. When the business owner through the earned profit sees that the business is operating well, one decides to expand it so as to earn more profit. Profit is earned through deducting the total expenses from the total revenue (Gale, 2007, Pg. 201). This indicates that the revenue must be more than the expenditure in order for the business owner to earn much profit. (Abbott & Penlebury, 2002, pg. 96)When the total expenditure is more than the revenue generated, the business will make loses like with the case of the Kids Clothes Pty Ltd. In this paper, I am going to discuss about how Mary, a successful business lady will expand her business structure through her accountant’s advice and the legal actions Myra’s employees can take in claiming for their dues to the clothing kids company. Ways in which Mary can update her business structure Mary’s business is operating well and she wants to update the business structure to another one. By seeking advice from her accountant, various options will be given concerning the various types of business structures. There are various types of business structures each of them with its advantages and disadvantage (Benhargen, 2007, Pg. 101). Below are the various types of business structures. Partnership Partnership is a form of business in which individuals come together and operate as one. Partnership can be of two or more individuals. The individuals who come together in forming a partnership business are known as partners (Cory, 2005, Pg. 103). Being owned by more than two people, it has its advantages and disadvantages. Advantages Contribution of starting capital The most advantage of a partnership business is the contribution of starting capital. Compared to the sole trader business where Mary has to incur all the initial cost for in generating starting capital, here all partners have to make their contributions concerning the starting capital. It is therefore easy to acquire a large amount of capital since two heads are better than one (Moon, 2001, Pg. 108). It is therefore easy to start a business under this type of business structure and the large amount of contributed capital can enable the owners easily expand their business. Sharing of losses In case the business makes a loss, all the partners are obliged to the loss and each of them has to incur a certain proportion of the loss (Poop, 2001, Pg. 87). Compared to the sole trader business where Mary incurs all the losses alone, in the partnership business she will have an advantage of sharing the losses with other partners and hence reducing the burden. Higher degree of continuity Compared to the sole trader business, in case the owner, Mary dies or become unable to work, the business will also collapse (Emerson, 2004, Pg. 156). In the partnership business, even when a partner dies or become unable to work, the other members can continue with the business operations (Kelly & Holmes, 2005, Pg. 205). There is therefore a higher degree of continuity in the partnership business than in the sole trader business. Optimal decision making In the partnership business, all partners have to contribute their ides in making decision concerning the business. Gathering information from various individuals helps in coming up with an optimal decision (Seglin, 2002, Pg. 104). Compared to the sole trader business, Mary is the only person responsible in making decisions in the business. No human being is perfect and so Mary could have some weakness in making decisions (Shaw, 1991, Pg. 200). In Partnership business, she will be able to share her ideas with others and so make optimal decisions concerning the business. Disadvantages Sharing of profits Since the business is owned by several individuals, partners, the profit generated must be shared among all the partners (Lawson, 1988, Pg. 157). Compared to the sole trader business, Mary enjoys all the profits alone. The partnership business therefore becomes an disadvantage in that Mary will have to share the profit with the other partners. Slow decision making Since all partners have the right to provide their ideas concerning the business, decision making therefore becomes slow. Listening to each partner and digesting the various given ideas so as come up with an optimal decision takes a lot of time (Paliwal, 2006, Pg. 96). Limited liability partnership A limited liability partnership is another form of business structure that is usually formed after the partnership business. From the word limited, partners under the limited liability partnership are protected from all loses or wrong acts committed by other partners. Only the involved in the wrong or loss will be liable (Slorach & Ellis, 2007, Pg. 301). This form of business therefore holds the characteristic of a partnership and a corporation. Below are some of the advantages and disadvantages associated with this business (Snoeyenbos, Almerder & Humber, 2001, Pg. 118). Advantages Liability protection In the limited liability partnership, partners are protected from the losses incurred through other partners. Unlike in the general partnership business where all partners are responsible of any loss incurred within the business, here a partner is liable only for a loss incurred through him or her (Todeva, 2006, Pg. 119). This is an advantage in that one can try to ensure that minimal losses accrue so as to avoid incurring much cost. Optimal decision making Like in the general partnership business, all partners have a right to provide their views concerning certain decision within the business. Combining various ideas helps in arriving at an optimal decision (Minkes & Nuttal, 1985, Pg. 196). Like in the general partnership business, there is also a higher degree of the business continuity in the limited liability partnership since even when one fails to work or decides to resign, the other members can continue with the business (Artkinson & Nilles, 2008, Pg. 101). Disadvantages Limited liability The limited nature where by each partner is protected from losses incurred through another partner can also affect the partners negatively. On the side of the involved partner on the loss, he or she will incur all the cost alone (Moon, 2001, Pg. 109). Unlike in the general partnership where all partners are responsible of sharing the incurred loss, here only a few incur all the losses. Slow decision making There is also slow decision making under the limited liability partnership. Listening to every individual’s ideas, marching all given ideas and come up with an optimal decision consumes a lot of time (Popp, 2001, Pg. 89). Limited Company Limited company is another form of a business structure. In this type of business, individuals come together with an aim of forming a business and each member contributes some amount of shares towards generating the starting capital. Sharing of profits and losses is limited to the amount of shares one contributed (Seglin, 2002, Pg. 105). This means that, having more shares, one will enjoy large proportion of the profits and at the time a large proportion of losses. Advantages Tax flexibility In the limited liability company, members chose how they want to be taxed. They can be taxed as a sole proprietorship, partners or as the limited liability company itself. As a sole proprietorship means that the profits are not taxed but through a single members federal return (Emerson, 2004, Pg. 159). Being taxed as a partnership means that members will be pay the taxes the way it is charged in a partnership business. Limited liability In a limited company, all members are only liable to the proportion of shares one contributed. This means that one cannot incur losses more than his proportion of shares. Individuals with fewer amounts of shares enjoy incurring less costs in times of loses (Shaw, 1991, Pg. 202). Disadvantages Limited liability The limited liability nature of a limited company can also create some disadvantages to the members with small proportion of shares. Each member contributes in one way or another in the generation of profits (Gale, 2007, Pg. 205). However the ones with large proportions of shares enjoy much profit than those with small proportions of shares. Limited life Another disadvantage that the limited liability company has is the limited life nature. In case one of the shareholders departs from the business, the company cannot continue with its operations (Cory, 2005, Pg. 103) Conclusion According to the above explanations, it can be concluded that there are various types of business structures. All the given types of business structures have their advantages and disadvantages. Mary has been operating her business as a sole trader. Updating her business to another business structure, the best option is to engage her in a limited liability partnership. In the limited liability partnership, the business will be expanded easily due to the contribution of capital. Although Mary will be sharing profits with the other partners, she will have a limited liability in that she cannot incur losses that she was not involved in. Question two Introduction The aim of any business is to make profit. The main reason as to why people work is to earn some payments. However, there normally exist some conflicts between employers and employers where employers fail to pay employees. Employers may fail to pay the employees or employees fail to work as required by the employer (Paliwal, 2006, Pg. 100). Nonpayment leads to a discouragement to the employees. The law provides some protections both on the side of the employer and the employees (Judge, 1999, Pg. 256). Myra is also a sole trader whose business was running well. Since the year 2011 she started incurring losses which made her to transfer all the business assets to another business, clothing for Kids Pty Ltd in the year 2012. Myra also awarded herself a large bonus while her 10 employees who were still working in her business Kids clothes Pty Ltd were not paid. Some legal actions exist in protecting the rights of employees. Legal actions the employees can take in claiming their dues to the Clothing for Kids Pty Ltd. According to business law, a purchaser of assets known as a successor is liable for the seller’s liability. To avoid this extra cost, the successor is required to demand for all business receipts at the time of purchase to ensure that all dues were paid and no claims exist (Poop, 2001, Pg. 105). If the successor fails to do so at the time of purchase, he or she becomes liable for all the seller’s claims. If the Clothing for Kids Pty limited never demanded for the payroll receipts to ensure that all employees were paid or not, it will therefore be liable for settling all the employees’ dues (Todeva, 2006, Pg. 121). The employees therefore have a right to sue the clothing for Kids Pty limited on their claims. Through the court order, the Clothing for Kids Pty Ltd will be liable for paying all the employees dues and so the employees will have their claims settled. According to the Fair labor standards Act, one of the key obligations of employers is to pay their employees. The law provides that, in case where an employee is not paid, he or she should first put the issue in a writing form asking for the payment. If the employer does not respond, one has a right to sue such an employer in court (Shaw, 1991, Pg. 206). In order for the employer to be sued in court, there must be written contract made between the employees and the employers. If no written contract existed, such an employer cannot be sued in court (Moon, 2001, Pg. 126). Myra’s illegal action of selling all the business assets with no consent of the employees and not paying them therefore can be taken to court. However, Myra will be sued in court only if she made a written contract with the ten employees. If no written contract was made, Myra cannot be sued in court even if her action was illegal. The business law also provides that, an employer or a business order cannot sell all the business assets without the consent of the employees (Corry, 2005, Pg. 111). Employees are also a part of the business and have a right to be informed of any action taken against the business. Myra’s action of awarding herself a large amount of money without paying the employers is unethical. A business owner is supposed to pay hi or herself last and not first (Judge, 1999, Pg. 300). The outside claims should be mate first. Myra could have used the large amount of money which she awarded herself to settle the employees’ claims since they do not belong fully to the business. Myra here also deserves to be sued. Legal actions in which employees can take incase an employer behaves unethical In the case where employees are aware of some unethical behavior conducted by the employer, employees have a right to report the matter. In such a case, employees can report the issue to the company’s chief legal officer. Such employer will be taken some legal actions (Poop, 2001, Pg. 90). In the case of Myra’s business, the employees should report Myra’s action of selling all the business assets to the Clothing for Kids Pty Ltd and paying herself a large bonus without paying the employees. Myra has a right to be sued in court. Myra’s action was illegal and the employees have a right to sue her through the various laws (Judge, 1999, Pg. 346). The employer can only sue Myra only if they made a written contract. Conclusion According to the above explanations on the two cases, it can be concluded that business laws exist and must be followed accordingly. Employees have to be protected as they are the ones who suffer most incase a business runs a loss. In the case of Myra’s business, when Myra discovers that the business is making too much loss, she went on and transferred all the business assets and awarded herself a very large bonus. In this case, Myra does not incur the loss but employees who were not paid for a number of months incur all the loss. Employees therefore need to protect through the legal laws. Employees should also ensure that there is a written contract made with the employer before starting any work as if there is no written contract, employers who become unethical cannot be sued. References Abbott, K., & Pendlebury, N. (2002). Business law (7th ed.). London: Continuum. Atkinson, K. J., & Nilles, K. M. (2008). Tribal business structure handbook (2008 ed.). Washington, D.C.: Office of the Assistant Secretary-Indian Affairs. Bernhagen, P. (2007). The political power of business structure and information in public policymaking. London: Routledge. Cory, J. (2005). Activist business ethics. Boston: Kluwer Academic Publishers ;. Emerson, R. W. (2004). Business law (4th ed.). Hauppauge, N.Y.: Barron's. Gale, C. (2007). The business of business law. Managerial Law, 49(1/2), 10-12. Judge, S. (1999). Business law (2nd ed.). Basingstoke: Macmillan. Kelly, D., & Holmes, A. E. (2005). Business law (5th ed.). 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