Employees Potential Competitive Actions - Essay Example

Megan decides to form the company with Tom and Rashida, this mode of organization will allow the members to separate their personal affairs from the operations of the firm. In addition, the LLC will protect its interests.
On the other hand, Megan can also run the company along with financial help as a loan from Tom and Rashida given that a limited liability company can have one director if there is only one member and one shareholder which can be the same person who is the director.
Considering that Megan may have other personal assets from the current business, the LLC will not tie her assets to the company. In the UK, an LLC limits liability to the total value of unpaid shares
There are various benefits of Megan, Tom, and Rashida forming an LLC:
• More flexible: An LLC has more flexible management as compared to a corporation. In this regard, this permits the business owner to develop a structure based on the needs of the business owners and has the potential for growth (Shenkman, Weiner, and Taback).
• Limited liability: As the name suggests, the LLC protects the owners as well as the shareholders from personal liability in case of debts or judgments against the business venture.
• Tax options: A limited liability company has the freedom to choose if it wants to be taxed as a corporation, sole proprietorship, or partnership.
• Little compliance issues: In most cases, an LLC does not require to an annual general meeting or a board of directors. In addition, there is less paperwork as well as record keeping needed in comparison to a corporation.
• Perpetual existence: An LLC can continue to exist even if the owners die or sell their shares and can only cease to exist if struck off the Register, terminated, or liquidated (Shenkman, Weiner, and Taback 223).
• Taxes: In a limited liability company the profits earned are taxable only at the corporate level but the LLC pays no tax (Shenkman, Weiner, and Taback 219)
• The LLC is a credible and business-trusted structure since it has a standard structure that the international business community is familiar with. This means that Megan, Tom, and Rashida can expand their business to other countries.
• It can accumulate capital promptly by issuing shares ahead of formation as well as any other time after formation.

How to prevent employee competitive actions
There are various ways in which Megan can protect herself from current employees’ potential competitive actions. An employee’s competitive actions need to be governed by contracts between the employer and employee (Norrbom and Copenhagen 41). Megan needs to ensure that the employees sign an enforceable non-compete agreement. In the same way, the enterprise should use restriction of competition clauses. Therefore, this will protect the business against the competitive actions of former employees. Megan also needs to ensure the validity of the non-competition clauses by concluding it in writing and agreeing with the employee by signing.
The clauses in the agreement should stipulate that the employee should not compete with the company for a certain period after leaving the firm. The departing employee should not take anything when she or he leaves. Legal action will be taken if the employee breaches the agreement. According to Lianos and Geradin (342), sanctions that are aimed directly to harm people who breach the non-competition rules reduce the incidences of breaching the competition rules.
Megan should conduct an exit interview that reviews the existing agreements and obligations, whereabouts of files and information, project statuses, and ongoing duty of confidentiality. Read More