Question

You just passed the bar and are working at a small firm in Temple, TX when a new client leaves the following voice mail that was forwarded to you from the senior partners:

"Sir, I am going to be starting a business and wanted to get some advice about getting started. I have heard these ads on the radio about Legal Zoom for incorporating a business and wonder whether I should do anything special, like incorporating, or have to do anything special. I just don't really know about this stuff and wanted some expert advice about how to get started.

As for my business, I'm going to be a weekend fishing guide on local lakes. I'm young single and don't have a lot of assets....mostly debt...lol. The budget's been pretty tight for me, but I think over time I can make some money doing this. I am really busy too with my full time job, so I'd like to keep the paperwork/other hassles to a minimum. Any advice would be greatly appreciated!

Dave Kubiak"

The investors wish to consider only the following four business entities:

• Sole Proprietorship
• Limited Partnership
• LLC
• C Corporation

Instructions: In a well-developed response (multiple paragraphs), discuss the relative advantages and disadvantages of each entity with respect to each of his stated objectives, and discuss ultimately which of the entity you would recommend for him. Address your response to him. In this case, appropriate grammar, spelling, and good writing skills are essential for future business.

business law

Answer 1

Sole proprietary :

Advantages :

1. complete Control and Decision making
2. No corporate tax payments

Disadvantages :

1. Lack of investor support
2. Personal liability for debt and obligations

Limited Partnerships

Advantages :

1. Limited liability
2. Maximum power

Disadvantages :

1. Risk for freezing personal assets
2. Can loose status if excessive participation is seen

LLC

Advantages :

1. Limited liability
2. Choice of tax regime

Disadvantages :

1. Limited life span and operating flexibility
2. Excessive paper work

Corporation

Advantages :

1. ​​​​​​​Flexibility to raise funds
2. Only have to risk of equity, but not legal claims

Disadvantages :

1. ​​​​​​​More time and money for organising
2. Excessive paperwork for licensing and time

​​​​​​​Out of all it is best to adopt limited liability company mode because liability is limited and allows the individual to scale up business and choose his tax which will reduce his cost and debt overall.