Legal, Social, and Economic Environments of Business
Student’s Name
BUSN105-1104A-286: Introduction to Business
Mr. Rodney Cullifer xxxxx 9, 20xx
American Intercontinental University
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LEGAL, SOCIAL, AND ECONOMIC
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Abstract
The purpose of this paper is to capture the type of legal form of business to use that would be appropriate to address the business issues enable the firm to succeed. Part one of this paper is a brief interpretation to address the business issues the inventor is currently facing. Part two, discusses the advantages and disadvantages of each business type (sole proprietorship, partnership, and corporation) when compared to the issues and each other. Part three, identifies the selected legal form of business to use that addresses the business issues, and why this most likely to succeed.
LEGAL, SOCIAL, AND ECONOMIC
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Legal, Social, and Economic Environments of Business
An inventor who enjoys working around the home and doing minor repairs and remodeling came up with a great idea for a new kind of home appliance that is less dangerous to operate compare to other similar products currently in the market. Despite the technological idea convinced that it would be applicable in a wide range of other products the inventor is facing with business issues, such as, having no management skills and with little financial skills. In addition, the inventor does not have knowledge in manufacturing except other than it costs lots of money where net worth is already not very high to fund a start-up. The inventor also is facing a personal issue from not getting the full support and confidence from the spouse doubting the idea, and because of how much time this venture will take away from family time.
Examining each business type (sole proprietorship, partnership, and corporation) carefully and giving much attention and consideration to the technological idea and circumstances surrounding the inventor’s issues in deciding which form of business to utilize is vital to the success of the business.
The major advantages of sole proprietorship include: simplicity in organizing and operating the business, lack of red tape or attorney fees, ability to have sole control of conducting the business, simpler government regulations, (Fay, 1998); and the sole proprietorship does not have to share the profits from the business with anyone (Ebert & Griffin, 2011). The disadvantage of the sole proprietorship is it would be difficult to borrow money for start-up costs or expansion, and being personally liable or responsible for lawsuit and all debts incurred of the business (Ebert & Griffin, 2005).
The partnership has two legal forms: general and limited. The advantages in a general partnership the owners work together to manage and finance a business (Trend, 2007), these
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addresses the Inventor’s low net worth, and the personal issue with the spouse to be able to set aside for family time. The disadvantage is that both partners are liable for all the business debts and share the profits (Trend, 2007). A limited partnership consists of one or more general partners who manage the business and are personally liable for debts and one or more limited partners who invest in the business in anticipation of a share in its profits (Trend, 2007). The disadvantage, the limited partners do not manage the business and are not liable for the debts of the partnership beyond the amount invested (Trend, 2007). Taken as a whole, the major advantage of the partnership whether it would be general or limited partnership is it provides the possibility of mix talents and management skills (Fay, 1998), which directly compliment to the
Inventor’s lack of management skills and little financial skills. The disadvantage is partner's rights are generally not transferable without the consent of all the partners (Fay, 1998),
