Tinkers Home Security Service (Sole Proprietorship) (Essay Sample)

Student’s Name
Professor’s Name
Institution
Course
Date
Business Law
In the course of conducting business, there are several kinds of institutions that one may establish or run. Such kinds of entities comprise of sole proprietorships, Partnerships (General and Limited Liability Partnerships) and Corporations (LLCs and Corporations). Businesspersons select an entity of choice having made various considerations such as the ease of establishment, the cost of establishment, the nature of the business transactions, the liability that attaches as between the owners and the business among other things. In this assignment, there are various concepts to be assessed; separate legal entity, limited liability and legal personality.
* Tinker’s Home Security Service (sole proprietorship)
Sole proprietorships refer to businesses entities which are run and managed by a single natural person and with whom there aren’t any legal distinctions. The main advantages of these kinds of businesses lie in the ease of formation as well as the relatively lower cost of the same. The most distinct feature is that the proprietor is not conferred limited liability from the business because the business is not deemed either as a natural or artificial person. This means that the owner of the business is wholly liable for the business’ debts and his or her personal property may be attached in order to pay the business’ debts CITATION Pet14 \l 1033 (Clarke, 2014). Whether or not this is an advantage depends on which side one is looking at it from. In the case of Tinker’s Home Security Service, I shall be deemed personally liable.
* Tinker & Tailor’s Home Security Service (general partnership)
General Partnerships denote an arrangement in which the partners transacting in a business relationship are jointly conferred unlimited liability to the business entity in that their personal assets may be attached to discharge the business’ obligations. Just like in sole proprietorships, the partners file their personal tax returns and they are fairly easy to establish. The only difference between sole proprietorships is the slightly more complex establishment process and the fact that the latter are run by an assemblage of two or more people. In the event of a legal suit subsisting in a court of law relating to a general partnership, the partners are equally and jointly liable to discharge the partnership’s obligations.
* Tinker & Tailor’s Home Security Service (Limited Partnership)
A limited partnership is a form of partnership that is in close proximity to a general partnership except that whereas in the former case there must be at least two partners, the latter case requires the participation of at least one General Partner and one Limited Partner. Also, a Limited Partnership has some extent of limited liability which is not present in a general partnership. General partners in a limited liability partnership are liable to the partnership’s obligations to the same extent as the partners in a general partnership CITATION Pet14 \l 1033 (Clarke, 2014). Their personal assets may be attached to discharge the obligations of the partnership. Limited partners on the other hand are conferred limited liability to the partnership’s obligations so long as they do not actively participate in the active management in the partnership. Active involvement in the management process usually constitute waiver of the limited liability.
Other than becoming a limited partner, there are other means of limiting one’s liability as a partner in a limited partnership. Whereas in general partnerships it is assumed that all partners are equally liable, here the extent of liability is calculated by evaluating the ratio of the portion owned by each partner. Partners are only liable to settle the percentage of the debt that is equal to the percentage of their investment or ownership in the business CITATION all12 \l 1033 (allbusiness, 2012).
* Tinker & Tailor’s Home Security Service, Inc. (corporation)
Under the income tax ordinance there are two kinds of corporations; a C corporation and S corporations. A c corporation refers to any entity that is taxed separately from the owners while an S corporation the owners are liable. In S corporations, the owners are not only liable to business debts but also report their share of corporate loss or profit to their personal tax statements. The same does not apply to C corporations.
In the event that a matter is brought to court in which a corporation is party whether as an s or c corporation, the owners will not be liable to represent the business because the entity is conferred separate legal persona. This means that a corporation exists separate from the personality of its creators. When it comes to offsetting debts however, the owners of an s corporation will be liable to discharge the company’s debts while the owners of a c corporation will not. How to minimize personal liability in an s corporation is similar to how the same is attained with general partners in a limited partnership. The owners of a c corporation are however not liable personally for any debts by the company CITATION Tin16 \l 1033 (Maiolo & Banks).
* Tinker & Tailor’s Home Security Service, (LLC)
A Limited Liability Company is complex business structure explained by a private limited liability company