Business Entity Case Study Essay
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Lou, Jose and Miriam can go into business in the form of a corporation, or partnership, or LLC where Miriam provides monetary capital, while Lou and Jose provide manpower. An operating agreement or purchase-option agreement should be established under which Lou and Jose could each buy a predetermined portion of the business at a predetermined cost. If they choose to establish a corporation, they can elect to be taxed as an S corporation where they will not pay tax at the corporate level.
The taxes will be paid at the personal level to avoid double taxation. One thing that should be guarded against is entering into a future agreement where manpower or future personal effort will be exchanged for shares or capital contributions. This is because capital contributions must have present value. Furthermore, Miriam must be aware that any present transfer of her capital contributions to either Lou or Jose capital account or shares, could be considered as a gift, and could subject Miriam to gift taxation.
Also, it could be viewed as taxable income to Lou and Jose, which would reduce their net investment value (Hartman, 2006).
Based on the fact that Frank wants to establish the extermination business in many different places, the first thing he needs to think of is that his business should be a corporation. His plan will not qualify for a limited partnership. The only option available to Frank is the corporate option because Frank plans on establishing the business nationwide. Projecting the expected growth rate of the business, it may be best to file for a standard C corporation which will allow his business to take in more than 30 investors which will likely occur based on franchises or other opportunities by which he can acquire investor money for the business. One of the primary reasons is to remove his own personal liability by making the company a legal entity of its own. Frank must pay careful attention to the fact that he will be using chemicals in homes and they must be properly tested and approved for public use. He must make sure that all the chemicals meet the requirements of necessary to be used in people’s home.
Because of this, it is important for Frank to have someone who can take the time to verify the validity of each product that he uses to ensure its safety. Furthermore, he must ensure that he has adequate liability insurance to cover lawsuits should someone be injured by a chemical or by an employee in the home of a customer. The liability insurance would be necessary to cover the cost associated with medical bills or a lawsuit associated with an action taken on someone’s property.
This insurance should be in place from day one and Frank must make sure that all employees are covered by such an insurance policy. Frank will have some time before he needs to focus on additional employment laws. The early stage of the business will not require a lot of paper works and legal actions. As the company grows to more than 50, it will require additional investments of time and money to ensure the company is operating within its legal boundaries. At that point the company will need to have some sort of legal representation to ensure the actions taken by the company are done in an appropriate and legal manner (Mallor, 2003).
Under the Civil Rights Act of 1964, a person cannot be discriminated against in employment based upon race, color, nationality, religion, sex age or disability, except where an employer would suffer an undue hardship if it were required to employ under the discriminatory condition, and where no reasonable accommodation of the employee is possible.
In the case of Michelle who is pregnant, it presents an identifiable undue hardship to the employer, because should she or her fetus be injured during the operation of the jackhammer, the employer would be subject to a workers’ compensation claim. In addition, because the job requires the operation of the jackhammer, there is no reasonable accommodation that the employer can possibly provide, which would not prevent the employee from working. Therefore, even though the employer would discriminate against Michelle, it is not liable under either the Americans with Disabilities Act or under the Civil Rights Act which will be discrimination based on disability and sex respectively. In the case of Eric, him not having a high school diploma excludes him from consideration for employment. However, as a person 40 years or older is protected by the Age Discrimination, because it is difficult for older employees to obtain high school diploma if they do not possess it already.
This implies that, Surebuild could be liable for age discrimination, if the company uses the lack of a diploma as the reason for denying Eric. In the case of Felipe who does not speak English, Surebuild could be held liable for discrimination if English is not a requirement for the performance of the position he is applying for. Surebuild could be charged with discrimination against race, and nationality. Considering Nick, he has a high school diploma, and is well qualified for the job based upon his education. The problem he has is that, he has no experience and he is also epileptic. However, the advertisement does not state experience with a jackhammer as a requirement.
The only issue at hand is his epileptic condition. Surebuild can deny Nick for employment and will not be liable for discrimination against him for being disabled. This is because he can have a seizure in the middle of the operation of the jackhammer and that can cause injury not only to himself but to others as well. However, if Nick can show proof or medical records that suggest that his illness is controlled by a certain medication and that he will not have a seizure while operating the machinery, then he should be qualified for the position. If Surebuild refuses to employ him based on his illness, the company will be liable for discrimination against the disabled (Mallor, 2006).
Hartman, L. P. (2005). Perspective in Business Ethics (3rd Ed.). Columbus, OH: The McGraw-Hills Companies.
Mallor, J.P., Barnes, J.A., & Bowers, T.L. (2003). The Ethical, Global, and E-Commerce Environment (13th Ed.). Columbus, OH: The McGraw-Hills Companies. *