1 Business Entities, Law, and Regulations Business Entities, Law, and Regulations Extermination business: Frank is a wealthy investor

who plans to open a chain of exterminating businesses across the United States. The type of business that Frank wants to open up is refereed to as a chain store. A chain store is basically a group or string of retail outlets. Chain stores can sell just about anything and usually get their supplies from large warehouses so as to reduce their overhead costs and increase the purchasing power of the retail chains purchasing agents. The differentiating feature of chain stores and multinationals is that with the latter, they have a presence in more than one country. Due to the presence of chain stores across various states, they are constantly challenged by tax laws, valuation methods, accounting practices and penalties within the various state laws jurisdictions that they operate in. In order to avoid the wrong arm of the law, chain stores are required to abide by the corporate tax laws within their various regions of operation. This enables proper reporting of such businesses that mandates greater transparency due to the scope of their operations. In order to narrow down the differences in pre-tax income reportable for tax compliance and financial reporting purposes, retail chains need to keep adapting to new accounting standards issued by a battery of regulatory bodies. Every type of business within retail chains has their own respective standards that reflect the purposes for the business in which they serve (Taxes, 2010). For purposes of control, it is essential that the retail chain get itself organized centrally with a headquarters having the control over the most important aspects of the business operations. The exterminating retail business needs to have everything from its stock selection, relationships with various stakeholders and its logistical decisions centrally managed. Just as

2 Business Entities, Law, and Regulations much, elements such as pricing, administrations, brand development and also the discount policies to apply should all be taken care of from the headquarters (Comarch, n.d.). Regarding the laws and regulations governing the exterminating retail chain, each pertains to the requirements such as licenses, expectations and permits that would enable the retail store to function legally. Some of the most common regulations and laws include ensuring certain permits are acquired for operational purposes. These include at least the employer identification number/federal tax identification number which is used for the identification of a business. The retail store also requires the acquiring of a business license that permits the retail store to carry out the functions and responsibilities stated there in. A resale license or certificate is used if the retail store wants to buy and sell products and not pay sales tax. Each state that the retail store will be operating in will have its own regulations regarding this license. So as to be legally recognized by its name, the retail chain will also require the having of a business name registration or DBA certificate. For any special purpose business probably such as the exterminating business, Frank will need to get his business a professional license to show that his business is proficient and certified to carry out the skilled nature of exterminating. Franks business must also comply with the occupancy laws within every area the business will be located in. While every state has its laws and regulations for businesses, Frank will need to carry out the necessary research on any other permit he will need (Waters, n.d.). With the laws and regulations will also come with the corresponding risks that Franks retail business may be encountered with. Ensuring that the business does not go against the law will be Franks probably biggest challenge and risk since the fines can be costly for any business. Probably the single largest risk that Frank may encounter may be that the business may end up not being as successful as he had hoped, but worse still, it could collapse altogether. Seeing that

3 Business Entities, Law, and Regulations Frank has invested his personal resources to fund his business, a total personal financial loss would be the biggest risk facing him so far.

References:

4 Business Entities, Law, and Regulations Comarch (n.d.). Retail Chain Stores. Retrieved January 21, 2011 from http://www.comarch.com/erp/industry/retail-chain-stores. Taxes (2010). Retrieved January 21, 2011 from http://www.slideshare.net/kishorejets/tax-issuesfor-multinationals. Waters, S. (n.d.). Retail Business Licenses and Permits. Retrieved January 21, 2011 from http://retail.about.com/od/insurancetaxeslegal/a/license_permits.htm

5 Business Entities, Law, and Regulations Professional practice: Akiva and Tara have just completed all educational and experiential requirements to be licensed as obstetricians. They want to open a birth clinic together. They will take out a large loan to finance start-up costs. The fact that Akiva and Tara want to open a clinic together, they have a couple of options to choose from in the type of business they will startup. They can either register a partnership where it is an arrangement in which the entities involved come together and agree to work towards the advancement of their personal interests. Both will basically co-labor to share both the business profits and losses. On the other hand, they can register a limited liability company in which this business will basically limit the liability of its owners to the assets of the business. The latter form of business is more permanent in nature but within the medical profession, what are seen are mostly partnerships. The legal framework that partnerships operate under is usually within the confines of the framework created by Congress in statute. They must also be in compliance both applicable regulations and policy guidance. According to section 4 of the Companies/Partnerships Act, the maximum number of partnerships is 20. To ensure professionalism and to avoid a conflict of interest, a partnership agreement is normally meted out to the partners, outlining the duties, responsibilities and limitations of each partner. A Limited liability partnership is an extremely flexible business vehicle. LLP partners, unlike a company, are both the shareholders and directors. The partners are free to organize themselves internally e.g. how you will share profits, which will be responsible for management and how decisions are to be made. The risky part of partnerships is the sensitive nature of its structure. As with any two individuals relating with each other, partners can get involved in a disagreement which affects the business. The withdrawal of a partner for these two would mean the end of the partnership.

6 Business Entities, Law, and Regulations The partnership would also end with the demise of either of the partners. The other risky part is that partnerships do not have limited liability on the partners assets and a court can attach personal property in the recovery of debt, unless they register an LLC Partnership (Spadaccini, 2005). When it comes to the paying of taxes, while it is not levied at the corporate level, what happens is that the entire profit generated is fully distributed to the partners and each partner reports and is taxed individually with a shareholders 1040 form. Tax brackets therefore apply in the case of the partnership formed (Perez, 2009). Each partner will therefore have a level of control and this will be according to the partnership agreement that the two partners will have agreed to. There may be a general partner and a principal partner, but how control of the partnership would be handles would depend solely on the agreement that the two have with each other.

References: Perez, W. (June 12, 2009). Incorporating Your Business. Retrieved on January 21, 2011 from http://taxes.about.com/od/taxplanning/a/incorporating_3.htm Spadaccini, M. (June 2, 2005). The Legal Ins and Outs of Forming a Partnership. Entrepreneur. Retrieved January 21, 2011 from http://www.entrepreneur.com/startingabusiness/startupbasics/businessstructure/article779 80.html

7 Business Entities, Law, and Regulations Construction Scenario: Mei-Lin is the hiring manager for Surebuild, Inc., a new construction company. She has advertised a position as a jackhammer operator. The positions description states that the successful applicant must have a high school diploma. The following people apply for the position: Michelle, 35, who appears to be pregnant, is a high school graduate, and was formerly employed as a jackhammer operator; Eric, 55, who is experienced with a jackhammer, but has no high school diploma; Felipe, who is 38, speaks no English, has no high school diploma, but is experienced with a jackhammer; and Nick, 23, a college graduate who is epileptic, and has no experience with a jackhammer. To start with, it is assumable that the construction firm is a limited liability company based on the nature of its operations which involves considerable amounts and levels of risk. With this in place, the fact that it has a hiring manager also showcases the element of a control structure in place. Most likely, this would involve having directors, line managers and subordinate staff, who in this case are the jackhammer operators. Being a limited liability company, Surebuild falls under corporate taxation. There are also state and local taxes which must be paid for by the construction company, but which may vary by the jurisdiction in which the firm is in. Corporations are also required to be subject to both alternative state taxes as well as the Federal Alternative Minimum tax and make quarterly statement of their books of accounts. If the stakeholders of the construction firm receive dividends, then the dividends are also subject to tax since it is a form of income. The laws and regulations that govern the construction firm are those which fit the business description as one belonging within the fields of civil engineering and architecture. Such laws include the construction workplace misclassification act (CWMA). This is apart from the companies act which defines how the company is to be legally set up and recognized by law

8 Business Entities, Law, and Regulations even for the purpose of business it purports to be involved in. The fact that the firm employs people also subjects it to the equal opportunity employment commission act which covers aspects such as equal chances given for employment regardless of background, creed, color, race, etc. The workmans compensation act is also to cover for any injuries the workers may be faced with while at work since it would take care of both negligent and intentional torts on the part of the employer; and even the employee while at work. These are but some examples of the laws that the firm would be governed by. As seen by the torts act, it would also cover areas of risk that the firm may be faced with. Injuries are risks that the firm would be exposed to. Just as much, elements of implied and express authority would also come into play because the workers would each be acting according to the authorities inferred upon them or otherwise not. The organizational safety and health act also would make the firm liable in ensuring a safe working environment is made possible for the workers. While the firm is under no obligation to choose one particular prospective worker over the other, certain considerations must be taken into place before a hiring decision is made. The firm is required to make a hiring decision that is not biased in any way whatsoever. While the job only requires a high school diploma, it would not make ethical sense in hiring an over-qualified candidate such as a university graduate for the role. However, for as long as the prospective candidates skills closely match the required ones, the firm may go ahead and hire for as long as it operates under the equal opportunity employment act.