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Laws Affecting Business

Sole Proprietorship Facts

Sole Proprietorship Facts

According to business law, sole proprietorship is a distinction given to circumstances in which individuals who own a company is not held apart from their place of business. In this way, they are solely liable for all of its operations and are concurrently entitled to all earnings as well as total control over its dealings. In more specific terms, the owner and their company are interconnected as all company monetary considerations will be made placed into the filing of their own personal income taxes, therefore rendering an eventual return based upon an gains or losses.

In general a sole proprietorship, as according to business law, does not represent a "legal entity," and varying distinctions of it will not provide any means of achieving such a status. For instance, a sole proprietorship may be entitled with the actual name of the owner or another name, in either case will not affect it status in contrast to that of a legal entity. This type of ownership is often looked to as a desirable venture due to the straightforwardness in which it may be created and conducted with the appropriate resources, of course. 

All that is initially necessary is the registration of their name(s) as well as the acquisition of "local licenses." All operations to follow are under the discretion and occur as a direct result of the owner's actions. All contracts and checks must possess their name only. Bank accounts are also possessed under the owner's name as opposed to a company name. There are no delegations of tasks or other joint activities that one would expect within a company.

In most cases, however, a sole proprietorship may evolve into more integrated forms as it grows. Though not necessarily a legal entity, sole proprietorship must still operate with the specifications of business law in mind as the authority in many of its dealings. For instance, lawsuits may be sought after in which the owner will file a claim under their own name as opposed to an entire company's title. If you need legal advice and assistance, contact business lawyers.

Similar to any endeavors within business, there do exist positives and negatives. The benefits that may be incurred consist of the following: the ease at which sole proprietorship may be instituted, absence of "formalities," the lack of a need to cover "unemployment taxes" that would be required if they were to have employees, the freedom to intermingle both "business and person assets," whole control over the company's direction as well as its future sale or transfer. Drawbacks do leave a lot to consider as well, however. 

Any debts or other losses are the sole responsibility of the owner, so that there is no way out of it but through their own means, which may then affect their business and credit quite adversely. Owners may also not increase their capital by selling off parts of it, and such businesses do not have adequate life spans, past that of their owner. In addition to this is the fact that most investors are wary of putting their money in companies of sole proprietorship. This is due to the fact that they will be left depending on only one person, who may falter, leaving everyone in jeopardy of adverse outcomes.

 

Understanding Agency Law

Understanding Agency Law

Agency law is an area of business law, more specifically that of commercial, where the existence and relationship of a principal and agent is at the forefront. A "principal," the individual who is the main participant in any given situation, will have given over authority or power to an "agent," who then will be left with the legal rights to act on their behalf. Examples of such relationships include that of guardians/wards as well as real estate agents/sellers. The actual agreement between these individuals represents the "agency." In general a principal may give unto an agent any task he or she may be otherwise able to do on their own.
 
 
In cases of agency law, an agent may institute an additional relationship between their principal and another party. Throughout these proceedings, however, the agent will not incur any liability since they will not be included as a party in the contracts. The principal, alone, will acquire such a responsibility as set forth by the agent. Under contract, agency law specifies that the principal attain the services of the agent, in terms of their representation, in exchange for monetary compensation. 
 
 
What presents a slight difference in how employers oversee their employees is the fact that the principal informs the agent of their desires, and afterward, leaves the course of action to their discretion. An employer actually spells out exactly how they wish work to be done. Agents are also compensated on a basis of commission as opposed to a predetermined salary or hourly rate. In such a way, they may only expect payment based on their achievement of whatever the principal had required. In reference to real estate agents, they act on behalf of sellers as determined by a contract, and will receive a specified percentage of the sale they had garnered.
 
 
As set forth by agency law, agents' authority in terms of prescribed actions may fall into specified categories. These include: "express authority," "implied authority," "authority by ratification," "usual authority," and "apparent authority." Express authority is that which is included as part of the aforementioned contract. Authority is spelled out in specifics in writing for the agent to follow. Implied authority, however, deduces implications not actually stated in express authority. Such authority may be employed when the agent feels necessary as well as when actions will lead to the achievement of the Principal's original desired goals. An example would be the agent deciding to show a residence to a prospective buyer despite their principal being absent. 
 
 
Though not specified as an action to be done in the contract, such an act may be necessary as a sale may be garnered, which would be what the principal will have desired. Authority by ratification makes use of the past as an agent may go forward with actions with past authority in mind. This will be applicable under agency law as long as the principal provides their consent subsequently in connection to being "bound by the unauthorized acts of his agent." 
 
 
Usual authority concerns "customs of the trade," where consent is assumed by the principal in relation to the agent's actions as long as they reside within the field of legality. Apparent authority, as the last of these venues of power, entails that an agent be permitted to negotiate on behalf of a principal with another party despite prior consent. This is due to circumstances such as if the "third party" is led by the principal to assume that the agent had such authority to begin with. In a case such as this, such a belief has led to their knowledge of the agent's apparent authority.

Corporation

Corporation

In contrast to that of a sole proprietorship, a corporation is a business that possesses “legal rights” that distinguish it apart from its actual owner(s). A corporation is put into effect in accordance with the state in which it will reside. It resides under the umbrella of business law as well as under that of corporate law, which encompasses the way in which restrictions are placed upon “shareholders, directors, employees, creditors, and other stakeholders.” 
A corporation may also distinguish itself in terms of three types, which include a “municipal corporation,” “non profit,” or a “private corporation.” These titles represent varying areas of interest. Municipal corporations represent cities, towns, and other locales, while private corporations are formed by specified individuals whose sole purpose it is to gain more capital. Private corporations differ even more from non profit companies who do not seek out any monetary compensation aside from that which will contribute to the “public good.”
Due to the nature by which corporations exist, the term, “invisible hand,” is quite a reference to it. The invisible hand is definitive of the idea for which all parties to economic interests become a part of. This invisible hand is said to be the guiding force over how each group operates in relation to the economy. They do so with no actual order or immediate direction by the government, but instead, appear to be moved by an invisible hand that seems to usher them toward economic means and activities. In terms of corporations, it explains the “self-regulating nature” of its operations in relation to business. When forming such a corporation, also known as “incorporating,” which is guided by an invisible hand, there are qualifications that must be fulfilled. 
You must first decide on a free business name in accordance with the guidelines your state sets forth for corporations. In addition to state regulations, however, you must also be equally cognizant of “trademark law” when considering a company name. This is due to the fact that you may be violating such law when choosing a name already being used specifically for another existing company. Following this, you will need to position the heads of corporation that you wish to be instituted at the start. Paperwork is also important in the beginning stages as forms known as “articles of incorporation” are required, which incur filing fees in the hundreds. 
After all the appropriate paperwork has been handled, “corporate by-laws” must be conceived. These will set forth the way in which the corporation will function. An initial meeting must also occur where the positioned directors will gather in preparation for incorporation. Corporation “shareholders” must be given “stock certificates” as well. Following these tasks, you must acquire any and all “licenses and permits” that are necessary for the operation of your corporation.
When pursuing such an endeavor as the creation of a corporation, you may look no further than literature concerning it. Books may be an appropriate starting point, in addition to inquiry from individuals already involved in corporate activities, since they are usually composed by similarly involved parties. Regardless of sights set on incorporation, the invisible hand will continue to be the unintentional guiding force.

Limited Liability Corporation Partnership

Limited Liability Corporation Partnership

With the existence of both corporations and partnerships, we may already be aware that there are specific types as well. These include LLC's and LLP's, which denote "Limited Liability Company" and "Limited Liability Partnerships." For each title, the idea that is maintained is that both "members" of the companies as well as "partners" of the partnerships be held liable, but only to a point, meaning not in its entirety.

When referencing a limited liability company, we may relate it to the advent of smaller businesses, which may now have the opportunity to garner the advantages attached to corporations while still maintaining their reduced business models in terms of size. The IRS states that an LLC enables its owner to possess "limited personal liability" in connection to losses or other adverse actions against the company. Ownership of such a company is not confined to specific parties in accordance to business law. They may include sole "individuals, corporations," and other parties. 

Under business law, an "operating agreement" will be necessary to state how exactly such a company is broken down in terms of its "shares of ownership," for instance. This, however, is dependent upon the specific state in which you reside. Business that may not attain the distinction as an LLC include those such as banking institutions and insurers. The benefits of rendering you company under the title of LLC include the following: varying options in terms of tax qualifications, limited liability, decreased paperwork in comparison to larger entities, ability to be owned by one person, and no requirements for the existence of shareholders as well as other formalities. 

The downfalls include the hardships involved in creating profits, the possibility of compensation required for varying taxes, hefty "renewal fees," loans having to be spoken for by single persons, and the likelihood of foreign "taxing" authorities putting LLC's in the same category as corporations.

A business that represents itself under the title of LLP must have been formed by professionals such as accountants and business lawyers in most states. In addition to this, only half of all states may legally accept such business law concerning LLP's. They must possess licenses, much like that of LLC's, in order to operate under business law. 

By entering into a limited liability partnership, partners may no longer be held accountable for debts of other partners. In general agreements concerning such partnerships must be composed in writing. In relation to taxes, partners in LLP's may also be limited in the amount of losses they may deduct as well. Other disadvantages include the fact that decisions may be made in the absence of other partners.

In addition any assets garnered by the LLP are shared congruently throughout the partnerships. Investments and money transfer are also not as smooth a process within LLP's as opposed to corporations, which may make people wary of partaking in such endeavors. It would be advisable for you to do further research when deciding on what type of company you will place your efforts into.

 

Forming a Partnership

Forming a Partnership

A partnership is a type of ownership in which two or more individuals combine to share the responsibilities as well as decisions attached to the company in which they decide to form together. Being equal authorities and components of the formation of such a partnership, each individual will be expected to provide the monetary considerations required as well as any other necessities that the company may require. Laws affecting businesses do not seem to hold any strict restrictions on a partnership as each owner may leave when feel the need to, accompanied by their equal share of the company’s assets. 
In addition to this, partnerships most often do not need to report information other than that which is related to matters concerning tax returns, which state what is being garnered by the partnership. Though it is not a “taxable entity,” such a report must be filed. In relation to income taxes, partnership must be comprised of the following specifications. The individuals involved must be operating in concurrence with the specifications within the mutual agreement set forth for the partnership. They must have also provided accounts from individuals not involved, have specified each partner’s relationship to the other, their skills and contributions, and finally, their authority over the monetary aspects of the partnership.
When forming a partnership, laws affecting businesses require the completion of the following steps. At its very advent, you must acquire the appropriate permits as set forth by all levels such as state and federal. This may be attained by inquiring with the “Small Business Administration.” Following possession of such permits, registration of the company name in relation to its locale is necessary, as well as acquirement of an “id number” from the office which your state specifies. After these technicalities are completed, you will need to compose a “draft” of an agreement in writing that specifies all considerations as agreed upon by all partners. 
This will include the monetary considerations, responsibilities of each individual, as well as their rights to the company. This distinct and serious process would be best tackled with the assistance of a legal representative. Laws affecting businesses state that a final “partnership agreement” be comprised of its original pact as well as addition considerations that have been instituted with the concurrent approval of all parties. These alterations may be composed in writing or set forth orally. Such an agreement usually contains what each partner will expect in terms of what they are set to gain or lose in association with such a partnership.
Both advantages and disadvantages do exist when deciding to take on a joint venture as a partnership is. In terms of the positives, a number of individuals, or at least more than one will lessen the work load as well as ensure that all aspects are covered and will be under the scrutiny of varying minds. In addition, partnerships garner more in terms of finances in most instances. 
The negatives that may be encountered, however, include that the variations in partners may lead to many disagreements in management, which may then lead to undesirable monetary gains. Another consideration is the reliability of partners. The freedom to which they may leave is at issue as well as that of their trustworthiness in connection to honest handling of company capital. In addition, partners must always be prepared for the untimely death of one, so as to not be left in a bad place if one does pass away.
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