Factors to Consider When Choosing a Business Entity - Paper Example

2021-08-01 22:31:22
3 pages
591 words
University/College: 
Middlebury College
Type of paper: 
Course work
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Selecting an appropriate business entity is fundamental to the achievement of the organizational goals. When selecting a business entity informed decisions are made after considerable thoughts and analysis of particular facts and circumstances. To determine which entity would best fit the business, entrepreneurs should understand their goals while seeking professional advice. Business owners should consider the following;

Ease of creation

Availability of capital

Tax considerations

Owner's liability

Management and operation.

However, two key considerations should be made when selecting a business entity. These are; Availability of capital and ease of creation. Availability of capital determines how assets will be established into the entity. On the other hand, assessing the ease of creation is essential in deciding logistical formalities and how the business will be maintained.

C corporations and S corporations

C corporations are simple to form, and unlike partnerships, they are owned by single owners also known as stockholders. S corps are created by members who refer to their ownership regarding units rather than stock. When forming a corporation for new business, the S corporation would be more appropriate regarding flexibility taxation. Unlike, in C corps where income tax is paid at a corporate level, due tax in S corps are paid at the individual level after they are passed through the business.

The Administrative Procedure Act (APA) and Enabling Statuses

In a democratic system such as the USA, unlike in most dictatorial regimes businesses operate on free markets. However, the constitution offers federal legal systems that exist to regulate and control the business environment. The Administrative Procedure Act forms the basis for which agencies obtain their constitutional mandate to make rules regarding regulation of business activities by laws enacted by the Congress. Enabling statute is a federal law established by the legislature to mandate existing agencies with additional responsibilities (Werhan).

Warrant of merchantability and Warrant of fitness for a particular purpose

Warrant of merchantability implies that, for instance, Mary purchases a Laptop and later discovers that it cannot access the internet, she is protected by the warrant that guarantees that the laptop sold to her would efficiently work as per the communicated specifications. The implied warranty of fitness for a particular purpose applies when Mary explains to the seller that she needs a laptop that accesses the internet efficiently. If the computer fails to meet Mary's requirements, a breach of warrant for a particular purpose is done, and she is obligated to return the product.

Given a team of unskilled salesperson, it would be advisable for them to articulate the warrant coverage of the consumer products by identifying their full or limited guarantee for repair or replacement. This would be important in avoiding problems of disclaimer and misunderstood deceptive warranties.

Criminal sanctions on non-compliant corporations

The imposition of criminal sanctions on firms that are not compliant with the law is an emerging trend in the global environment. Compliance is beneficial to business entities because it allows for fulfillment of social obligations to the public consumers. The aim for the establishment of regulatory agencies is to ensure that consumers are provided with high-quality goods and services.

Unlike in the past where compliance violations were limited to civil penalties and loss of operational permits, today such violations are treated as crimes which amount to massive fines and might lead to prosecutions in a court of law. Imposition of criminal penalties on non-compliant corporations is essential because it eliminates companies which are only interested in making high profits rather than meeting the standards for quality goods and services.

Work Cited

Werhan, Keith. Principles of Administrative Law, 2d (Concise Hornbook Series). West Academic, 2014.

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