Commercial And Corporate Law Structures: Sole Proprietorship, Partnership And Limited Liability Company

Advantages of a sole proprietorship

Discuss about the Commercial and Corporate Law Structures.

There are three structures in any business organization. They include; the sole proprietorship structure, partnership business model and a limited liability company as enshrined in the law. Peter and Susan want to start PPM services under one of the three guises whichever is fair to the operation of the business and sustainability of their family assets (Chasalow, 2010).

Peter can start a sole proprietorship structure where he owns one hundred percent business ownership individually. He is fully entitled to all profits and losses that the business incurs.

It is the most simple form of any structure in business and set up. The following are the advantages;

It is easy and economical way: A sole proprietor is the structure simpler and less expensive to set up businesses. The costs are minimal, and legal costs are limited to licensing and permits.

Unlimited business control- Since you are the owner of the business, you have ultimate control over every decision in business. You will be not required to seek consultations with anyone else when you make decisions or want to make business changes (Copeland, Koller and Murrin, 2000).

Easy taxation- a sole proprietorship business is not taxed separately, so it is easy to meet the reporting requirements imposed for a single owner. There are also lower taxation in business structures.

There are no formal actions to business setup in a sole proprietorship. Whenever you are the sole  business owner, this condition instantly comes from its activities in a sole proprietorship business. In fact, you may already have the constitution in the business without recognizing it. Like any other business, a sole trader needs to obtain necessary permits and licenses to operate. Regulations will vary by industry, status and location. Tool Use Licenses and permits (in English) to find a list of permits, licenses and federal, state and local records you need to operate a business.

Companies

The cost depends on the Authorized Share Capital. To get this information you can enter the requirements (Georgas, 2003)

Characteristics of a registered company

Generalities

Is a necessity that this issue has generalities, in order to understand the importance of understanding the elements of the company. It is convenient at this venue studying the elements of the company, which are: labor, capital and management need.

Work

The work is the first element of the company, which we refer to below. The same is the element of the company that is composed of all the workers who can be employed and workers, for example is a worker concierge, an assistant, a secretary, a caretaker, among others.

Constitution of a sole proprietorship

Administration

The administration is the element of the company that is formed by managers of the company, which may be directors, managers, sub managers, among others. The administration is separated from the right of ownership of the company with more notoriety in corporate capital or large companies or immortals.

Capital

The capital is the element of the company that is composed of the investment in the company. That is, capital is the set of inputs that may be-cash or non-cash, registrable or not registrable, registered or unregistered (Limited liability companies, 2013). This element is easy to distinguish, however, in some cases implementation problems are presented by people who have no domain of business law, such as embargos present the company can be seized or assets of the company.

Need

For that to succeed a company are not enough these elements, but there must be a need for goods or services provided by it, and consequently in many cases the market is segmented in order to be able to lead the good or service provided by the company, to determine before investing whether or not there is sufficient need for good or service and avoid the failure of the company.

The corporation is quite established in our state and around the world therefore it should be studied in order to review its disadvantages, an issue that has not been studied by the writers. The disadvantage of the corporation is to be legalized minute books fraudulently by people outside the company and result in such a way that the control thereof is varied and consequently many problems to the company and shareholders incurred. This disadvantage is not commercial limited liability company and consequently the corresponding effect of approving the relevant legislative reform study is needed.

Faced with this problem some public registrars take the precaution of adding seats in the registration of legal persons book number and the name of the notary public legalizing the book. That is, the position of public registrar warrants a lot of responsibility and care in order to provide the necessary security that is sorely lacking in the Peruvian law (Mancuso, 2004). Another disadvantage of this type of company is that the share register can be changed and in this order of ideas not control the record is clear that is out of control. These two themes of the corporation have not been worked by the writers.

Companies

Peter should register a company together with Susan in order to safeguard their family assets from any incurring liability.

Advantages of a company rather than sole proprietorship and partnership

The limited liability company is a business model that is proven and successful. Business owners have all the company shares allocated privately. Shareholders can operate the business by themselves, or hire managers to manage the company in proxy form. The formation of a limited liability company produces a protection of individual or personal property, access to resources more, greater tax cuts and financial assistance.

Limited liability

The greatest benefit of limited liability company is the limited liability aspect it has. These companies have the ability to manage their own properties making them single entities that also manage their own debts

Tax advantages

The LLCs enjoy tax advantages besides limited liability. These business companies pay corporation tax on their taxable profits and are likely to be exempted from excessive rates of income tax. The formation of a company rather than continue as an individual company or an individual entrepreneur opens avenues to more tax-deductible expense and reimbursable allocations under benefits.

With adequate funding,a company can produce goods at a lower cost, increasing profits and customer satisfaction. Moreover, the future of the company becomes safer. The financial reports of limited liability companies “tend to hold more funds in the company to meet future financial commitments, which helps a growth” compared to self-employed entrepreneurs.

Business Continuity

The LLCs enjoy permanent succession because the company is a separate legal entity. Shareholders and employees acting “as agents of the company,” he writes, Tutor2u and therefore does not affect the company if they leave. In case of death or resignation, the articles of association of the company allocated quotas to the remaining members. The business interruption only occurs through liquidation or similar means. A succession guaranteed benefits not only members but also ensures jobs and community resources

Partnership

This is where peter introduces his wife susan and his friend jack to open a business and profits and losses are allotted according to the percentage owned by individual partners. Partnership is better than a sole proprietorship business since it allows distribution of risks.

How can peter arrange for jack and others to join the business

One of the most important operations the life of a Startup is obtaining financing. We have already discussed earlier in this blog about the Participative Loan as a form of financing, however, in this article we will develop the formalities to be fulfilled to carry out a capital increase as a result of receiving funding.

Characteristics of a registered company

The capital of a company is governed by its bylaws, which is where has much is the capital of the same, and where the number of units in which is divided and the nominal value of each specified.

Amendment of Bylaws

For practical purposes, in this article we focus on the case of a capital increase for a limited company, which must be agreed and approved by the General Meeting of Members, with the relevant majorities for a change in the bylaws (Unsworth, 2001).

The capital increase may be executed in two ways:

-through the creation of new shares; or

-By Rise in the value of existing shares, with the consent of all partners.

Here we will focus on the first mode, as talk about the event that is input to a new investment partner.

The answer to this question is that in reality does not happen a loss of most social capital as the capital increase is made with premium account.

What is a premium?

It is the premium that the investor pays the nominal value of the share.

To follow the thread of this topic, we pause to define two basic concepts to understand the operation of capital, which are the Pre-money valuation and Post-money valuation.Pre-money valuation is the valuation that has been given to the company by its activity in the market since its establishment, prior to receipt of investment and this assessment is independent of the share capital of the company.

The Post-money valuation is the valuation given to the company subsequent to the contribution of investment.

Then we will have a drill capital following the above concepts:

The corporate capital operation, may become more complex in the case study that we discussed earlier, so our recommendation is to seek legal advice according to business needs and objectives pursued by the parties.

The question is: who should protect our personal property: housing, house, apartment, land, vehicles, bank accounts, stocks in companies or others? The answer focuses on prevention against creditors. According to the practice, it is not advisable to have property (movable or immovable) in a personal capacity, that is, on their own behalf. Why? The reason is that the assets of the person liable for the debts of this. So when someone becomes a debtor of another, called creditor, this can seize the assets of one to exact what you owe him (Unsworth, 2001). Hence, in simple language is heard: “they left him on the street, they seized for debt.”

To avoid contingencies generated by the situation described (potential creditors), the solution is to protect our assets and have incurred. How this task runs? Many legal mechanisms provided for it. But all are based on a common denominator, and is the fulfillment of the essential requirement to honor and pay outstanding debts. To put to use the technique Cover your Patrimonial, you cannot have debts to pay. Only once this debt is extinguished that may be referred to the protection of property.

Conclusion

Though there are different forms of business, the best Peter can do is create a company rather than a partnership or a sole proprietorship to safeguard his assets and also to recruit Susan his wife and Jack his friend (Unsworth, 2001). A limited liability company has more advantage than both the sole proprietor and partnership businesses as they are their own legal persons different from the individuals.

References

Chasalow, M. (2010). Acing business associations. St. Paul, MN: West.

Copeland, T., Koller, T. and Murrin, J. (2000). Valuation. New York: John Wiley.

Fineman, S. (2000). The business of greening. London: Routledge.

Georgas, M. (2003). Incorporation and business guide for Ontario. North Vancouver, B.C.: Self-Counsel Press.

Gibbs, J. (n.d.). Companies.

Klein, W., Ramseyer, J. and Bainbridge, S. (2009). Business associations. New York, NY: Foundation Press.

Limited liability companies. (2013). Eau Claire, Wis.: NBI, National Business Institute.

LLC, LP, corporation, general, or sole proprietorship?. (n.d.). .

Mancuso, A. (2004). Incorporate your business. Berkeley, CA: Nolo.

McCaffrey, A. and Ball, M. (1992). PartnerShip. Riverdale, NY: Baen Pub. Enterprises.

Spadaccini, M. (2004). Entrepreneur magazine’s ultimate book of business forms. [Irvine, CA]: Entrepreneur Press.

Streeck, W. (2006). Governing interests. London: Routledge.

Unsworth, B. (2001). The partnership. New York: W.W. Norton.