Limited Liability Company and Illegal Business - Assignment Example

Name Tutor Course Date Business Structures Question 1 Making a decision on the kind of business venture that one intends to start is crucial. Similarly, once has to decide on the decision has to take a decision on the legal business structure to choose. There are numerous factors that are crucial to a business entity chosen such as taxation and liability. These five parties have education background from the major sections needed in the investment of the business app and pooling together these resources seems to be a good idea. In this case, the best business structure that they can choose is a limited liability company. Limited Liability Company. This business structure alludes to a form of business with features such as corporations’ liability with shielded advantages, and tax pass returns. The limited company emerged as a result of business owners desire to form a kind of business structure that gives them a chance to operate as a traditional partnership (Sargent, and Schwidetzky 23). The key goal was based on the partners’ income distribution and protection from individual liability concerning business debts as it is in the corporate ventures. In general, this indicates that unless a business owner starts a separate corporation, the owner is fully liable for all business debts. Nevertheless, in a limited liability company business structure, the firm’s debts responsibility is not assumed by the individual owners on the fact that they were no secured on personal grounds. There are other advantages that Rohit, Ariel, Charn and Levi can enjoy by choosing to run a limited liability company business. Pass through taxation is a key thing to note is that income generated by the firm can be treated as personal income, and it is not subjected to federal taxes. Limitless ownership is another imperative aspect with an LLC in that there is no limit on the number of people who are allowed to join it by the legal structures. The LLC can comprise of one member of a hundred of them. Management freedom in a limited liability company is not restricted. It is not a requirement for the LLC to have a board of directors, book requirements that are strict or a must to hold annual meetings. Finally, in a limited liability company, the owners enjoy allocation flexibility. This implies that the amount of capital that each party contributes to the business does not have to be equal to their percentage of ownership. Members come up with an operating agreement during the formation of an LLC whereby diverse percentages of company losses and profits can be allocated to owners irrespective of the amounts of their initial investments (Sargent, and Schwidetzky 81). In this case, this is advantageous in that owners can have a deal with an investor to have him or her finance half of the business app without substantially retaining have of your business. It is also important for Rohit, Ariel, Charn and Levi to factor in issues like transferability restriction. Apart from the benefits stated above restrictions on shares transfer is a critical issue with this type of company. In a limited liability company ownership interest are not transferable without restriction. In addition, the liability of the shareholders is a crucial feature in that the capacity that the shareholder's liability for company debts is based. It is worth noting that the shareholder limitation is likely to be affected in case he or she is a director of the beneficial aspects and other laws practiced. The limited liability company owners are allowed to avoid federal taxes, but they can also end up paying more depending on the set laws on individual income tax (Sargent, and Schwidetzky 34). Therefore, now that the parties involved in this case a have a lawyer and an accountant within the group are a good idea when it comes to the planning of the business. The LLC business structure is a new concept and does not a lot of cases an aspect that is likely to affect the predictability. This implies that a lot is needed regarding protection. As indicated above operating a limited liability company business structure offers numerous advantages especially for liability protection. The structure contains disadvantages as well. Therefore, all the parties should evaluate and weight bot sides to make the most effective decision and chose the best business structure. Question 2 Assuming that Rohit, Ariel, Charn, and Levi decided to start a Victorian partnership, there are certain problems that have been highlighted are prone to face them. A partnership, in general, is formed when two or more people up to a total of 20 decide to get into business together. The issue of dealing with an illegal business can be explained under the law agency concept. The agency here refers to the partner status as the legal representative and in this case Levi. One is referred to as an agent of a partnership if he or she holds the legal authority to act on behalf of the business entity (Contractor, and Lorange, 12). An agent for that matter Levi bid the partnership to contracts as well as other obligations over his actions on behalf of the partnership. In this case, the partnership is bound by the decisions and acts of the agent. Therefore, a third party involved with the agent of the partnership can rely on the agency or agent relationship in order to enforce the responsibilities undertaken by the agent in case the decisions made by the agent are deemed unfavourable and illegal on behalf of the partnership. The implication is that the agent acts within his or her authority scope the partnership is bound by the actions no matter how unfavorable they are. In a case of a law suit in this case Levi should stand in on behalf of the partnership. In general, the police are searching for the business partners and in the context of liability every partner has a joint liability for the partnership obligations. Each partner is liable for the illegal acts of a co-partner; however, a partner may face the law on an individual basis for the damages linked to the illegal acts of the partnership. The agreement provides for the indemnification of the partner for the percentage of damages incurred more than an individual proportional share. The illegal transaction is not only those prohibited by the law such as the sale of illegal goods or apps but an illegal transaction that is conducted by one partner without the consent of the other partners. In a partnership, each party has a particular amount of influence and control when it comes s to decision making. All partners should be conversant with and have a say on important decision that is being made such that one partner enters into a transaction that is not authorized by other parties it is considered a violation of the partnership and hence deemed to be illegal. Therefore, in the case of Rohit his transaction has not been authorized by the other partners and can be considered as illegal. Claiming that the app belongs to him is not in accordance with the agreement because all other parties have contributed as well in terms of intellectual resources like him (Contractor, and Lorange, 25). The partners should have an equal share of the profits and losses of the partnership now that they equally participate in its management. The majority vote is the most appropriate way to resolve this issue. Nevertheless, this issue seems to be more severe, and unanimous consent will be necessary. However, an illegal transaction like this one can have serious consequences for both the partnership and individual partner. All the illegal issue should be directed to the entity lawyer. Levi has assumed all the duties involving legal aspects and should be able to advice on the effects likely to occur and defend the interest of the partnership in case a lawsuit arises. The partnership does not necessary have to depend on a formal written agreement. Once all the processes are complete in its formation all the partners should know how their rights are in line with accounts, and bookkeeping aspects. In order to get the point Rohit father demand to access the partnership books of record it is important to note legal aspect behind access to the books and accounting records in a partnership. There is no partnership agreement that prohibits any partner from accessing the books or records of the partnership (Contractor, and Lorange, 32). This access freedom offers the partners, agents and the attorney a chance to inspect these records. Therefore, Rohit father is not a partner in this business and his demand to access the documents is not valid and does not feature anywhere in the partnership agreement. Rohit father cannot be able to obtain an injunction from a court as a way of gaining access to the books. In order to ensure that no unauthorized persons have access to these books, they should be kept in the principal place of the business. Works Cited Contractor, Farok J., and Peter Lorange, eds. Cooperative strategies in international business: joint ventures and technology partnerships between firms. Vol. 2. Elsevier, 2002. Sargent, Mark, and Walter D. Schwidetzky. Limited Liability Company Handbook, 2014-2015 Edition. Thomson Reuters, 2014. Read More