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Construction Business - Essay Example

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This paper discusses various issues regarding setting up a construction business. Because the scale of business activity in construction is large, the issues pertaining to this form of business are also significant and must be resolved in order to ensure smooth and profitable operation of the business…
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Construction Business
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Download file to see previous pages The construction business has some significant legal concerns as well, such as liquidated damages issue that should be taken into account. The business then requires finance for its operations and means of obtaining these finances are to be evaluated. It is important for the owners to study these matters to understand whether this business is well suited to them and to understand what kind of management skills, legal and financial expertise they should have in the enterprise for it to successfully turn it into a successful, profitable venture.
When considering the legal form of business formation, the choices available to a business include sole proprietorship, partnership, corporation, and the newest form of business formation, the limited liability company (LLC). These forms of business may be compared in terms of ownership, liability of owners, continuity of business, and transferability of interest, among others. Since construction is a business with a potential for personal injury where employees and customers can experience a fall or some other injury at the construction site, it is best to select the form of business entity that provides liability protection for the business owners. Liability protection is also an important consideration because in times of financial adversity, it allows the owners to be accountable only to the extent of their share in the business and no charge is placed on their personal assets. The two options that provide protection of personal liability are corporation and LLC. Corporations are further classified into C Corporations and S Corporations. Typically the term 'Corporation' refers to a C Corporation, whereas the S Corporation is a special type of corporation that combines tax advantages of the partnership and the corporation. The LLC is a new alternative brought about by the new regulation and has gained much popularity because of its acceptance in all states and amendments in several states making it more attractive. (Hisrich, Peters, Shepherd, 2004)
The LLC is considered a partnership-corporation hybrid because of its characteristics. Like partnerships have partners and corporations have shareholders, the LLC has members. These members do not own shares but rather an interest in the business. As mentioned earlier, the LLC allows owners to have limited liability protection, which would benefit the owners of a construction business by offering them protection from. The taxation for an LLC does not take place on the business level, instead the income, profit or loss is passed on to the owners and is treated as their personal income and reported in the owner's personal tax return.
Liquidated Damages
The construction industry is one in which legal issues arise very often. Breaches of contracts and failures to perform have to be dealt with by the employer as well as the contractor. Because this paper discusses considerations for owners of a construction business, we will look at the legal matters that can arise, from the viewpoint of the employer who assigns the task of constructing a particular project to the contractor. The relationship of an employer and contractor is such that
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