...Legal Issues for Business Organizations – LIT1 Task 1 Legal Issues for Business Organizations – LIT1 Task 1 – Part A The way a business is organized is an important part of the business’s structure. “Different organizations provide different advantages and disadvantages in creation cost and simplicity, ongoing maintenance requirements, dissolution and continuity, fundraising, managerial control, public ownership, tax planning, and limited liability.” The nature of the business being conducted has little to do with the way the business is organized. (Johnson, 2013) Sole Proprietorship: The basic concept of sole proprietorship is that there is no distinction between the individual business owner and the business. To start this type of business, in most cases, one only needs to begin charging money for goods or services. Because of its simplicity, sole proprietorship is the most common business structure in the United States. According to the U.S. Small Business Administration, “over 70 percent of businesses are owned and operated by sole proprietors.” (Beesley, 2013) Following are some of the characteristics that lend both advantages and disadvantages to this type of business organization. * Liability. As sole owner of a business, there is no severability of liability between the business and the individual. Therefore, all gains and losses of the business are also the gains and losses of the individual. The aspect of unlimited liability is one of the biggest...
Words: 2852 - Pages: 12
...LIT1 Task 1, Part A Sole proprietorship: A sole proprietorship is an inexpensive and easy to form business organization. This entrepreneurship gives the owner the ability to have flexibility in their schedule. The business owner of this organization will benefit from having full control and retains all the businesses profits. Negatively, the business owner is also personally responsible for all the debt. and liability the business may take on. In this organization if the owner dies, the business dies also. • Liability: In a sole proprietorship the owner is personally responsible for all of the liability, including all debts. and obligations. The Sole proprietors personal assets are unprotected if the company “goes under” and there are unpaid debts. • Income taxes: In a sole proprietorship federal income taxes are filed as an individual would and Income taxes are submitted on the business owners’ personal income tax return. In this organization the percentage of taxes paid are typically higher. • Longevity or continuity of the organization: A limitation for growth in a sole proprietorship is that it does not allow financial investors thus, leaving the business owner to rely on his/her personal finances. In this organization if the owner dies, the business dies also. • Control: The business owner has all the control associated with the business. The business owner can set up the company as he/she chooses. • Profit retention: The business owner in a sole...
Words: 2555 - Pages: 11
...Lit1 Task 1 Organization of Business Sole Proprietorship: Most common form of business today. Legally speaking the sole proprietor and the business are one in the same. Any legal issues such as law suits and tax liabilities are the same and the sole responsibility of the owner. There is no autonomy, no differentiation between the business and the owner. If the business gets sued, it is the personal assets of the business and the owner that are in jeopardy. It is also the easiest form of business to start and to end. A sole proprietor needs to obtain the appropriate licenses for the state and/or municipality in which they wish to do business then, they are up and running. All revenue is personal revenue for the owner. Any bills are paid by the owner. The business can be closed as easily as it was opened. Just stop doing business. The business cannot be passed on to anyone, when the owner dies the business dies. Any loans needed to do business will be in the form of personal loans from a bank since the business and the owner are one in the same. The owner’s credit worthiness is the businesses credit worthiness. Since the owner of the sole proprietorship and the business are one in the same, there is no need for agreements or contracts. General Partnership: Unlike a sole proprietorship, a general partnership is formed with an agreement between the parties involved. General partnerships are formed when two or more people agree to open a business and contribute...
Words: 1951 - Pages: 8
...Steve Wood LIT1 - Legal Issues for Business Organizations Task 1 Scenario A The purpose of the Family and Medical Leave Act of 1993 is to offer a balance between the stresses of both work and life. There are three main provisions of the act that are critical to the overall takeaway of what this law means to this situation. First, “Eligible employees can take unpaid, job-protected leave (they can return to their position). When they return from leave, FMLA guidelines require that companies return employees to their former position, assuming they are able to perform the essential functions of that position. If the employee is no longer able to perform his or her previous job, an alternative position with the same benefits, salary, and work hours must be provided to the disabled employee.” (FMLA Online) Second, Their insurance coverage stays as if they had not taken leave, COBRA does not take effect. And, “the leave can be tailored to fit the needs of the individual.” (FMLA Online) The law allows for the employee to take unpaid time to be able to care for his family without the need to stress that there will not be a job waiting with the same pay. The other part about this that is awesome is the fact that the employee’s insurance coverage stays intact without the need to involve COBRA. This law can also be tailored to the needs of the individual. If they need to have a continuous full 12 weeks, they can; if they need the leave to be split in different blocks of time, they can; lastly...
Words: 1722 - Pages: 7
...The Family and Medical Leave Act of 1993 or FMLA, entitles eligible employees of covered employers to take unpaid, job-protected leave for specified family and medical reasons. Employees may take up to 12 work weeks of leave in a 12 month period. Employees are entitled to take leave for a number of reasons; to care for a spouse, son daughter or parent who has a serious health condition; for a serious health condition that makes the employee unable to perform the essential functions of his or her job; and for any qualifying exigency arising out of the fact that a spouse, son daughter or military member on covered active duty or call to covered active duty status. (“Family and medical leave act - wage and hour division (WHD) - U.S. Department of labor,” 2002) Situation A deals with Employee A who has been with Company X for a period of 2 years. We can assume that since Employee A was employed for the stated amount of time, that he qualifies for the FMLA act of 1993. In order to qualify for the FMLA act of 1993, employee A needs to have been employed with Company X for a period of at least 12 months and have worked at least 1250 hours during the 12 months prior to the start of FMLA leave. (“U.S. Department of Labor- wage and hour division (WHD) – 2012”) Since it states that Employee A has worked for Company X for 2 years and he has received FMLA leave for a period of 11 weeks, we can deduce that he does meet the qualifications of FMLA leave. Employee A has asked to return to...
Words: 1237 - Pages: 5
...Task 310.1.2-01-06 1. Sole Proprietorship - A sole proprietorship is any business that is owned and ran by the same individual. There is not a difference between the owner and the business. The owner IS the business. The advantages of this include the owner retaining all profits and being in direct control of all elements of the business. The disadvantages of this are that the owner is entirely responsible for debts, loans, losses, and this form of business cannot include a partner or co-owner. Liability: Since the owner IS the business, liability is unlimited for the owner. They are responsible for all debts. This also puts personal assets in line of creditors. A sole proprietor could get wiped out with one large personal lawsuit and lose everything. Income taxes: Taxes for the business are processed as the owner's personal business, which is usually higher compared to other business tax rates. Longevity: This is based on initial work done by the owner when the business is started. It can depend on how the owner finances the business. Typical funding for this type of business is just a personal loan. Control: Owner is 100% in control of everything with the business and does not have to consult with anyone else prior to making important decisions Profit retention: Since the owner retains 100% of the profits, the returns on investments can be whatever the owner wishes at any given time. The owner can retain an entires months profits for investment purposes...
Words: 1049 - Pages: 5
...310.1.2-01-06 Sole Proprietorship: Sole Proprietorship is the most common and most simplistic type of business. This model of business the owner and the business are one and the same. A sole proprietorship is unincorporated. Every form of business has advantages and disadvantages. As the owner you can organize, name and take the business as far as your aspirations take you, a sole proprietorship has risks; the responsibility of time, personnel, scheduling, recruiting and accounting management of the company is on you. Liability – There are numerous liabilities in a sole proprietorship. As the proprietor, you are a liability because you are one individual. If an accident occurs, and you are hospitalized for an extended period you are losing revenue to pay your bills. The type of business you run may also be a liability due to outside weather conditions. If you have adverse weather conditions, you may have days or even weeks of lost revenue. If your setup a sole proprietorship the creditors have the ability to acquire your personal assets to compensate for the debt. Income Taxes – Planning for taxes with a sole proprietorship can be very difficult. Since the business and you are one and the same, personal income and business income must be filed and will be taxed at the highest rate. Longevity/Continuity – Sole proprietorship can be one of the hardest to earn money and resources. When the owner is no longer around the business cannot be passed to another individual...
Words: 3101 - Pages: 13
...Examination of Situation A In each case regarding FMLA, all data points need to be gathered before any request is granted. It is vital to determine whether the laborer is qualified for the leave and whether terms are met as stipulated under the Family and Medical Leave Act of 1993 (FMLA). The Act states that, in order for someone to utilize the leave he or she has to have been employed by the company for more than 12 months. Specialist A had worked for 24 months, and it can be determined that the minimum of 1250 hours had been completed. The premise of the law is to enable individuals to take care of their family medical emergencies without being at risk of losing their employment status. In order to qualify for leave under FMLA, it must be to care for a relative or one's self due to a serious medical condition. In the example of Employee A, he would qualify, as leave was requested to care for his wife giving birth to premature twins. She and the babies would require continuous care - under FMLA, this does qualify as a serious health condition. Employee A can be on leave for up to 12 weeks, as long as proper documentation is provided per FMLA, and should under no circumstance be subjected to any hardship or victimization based on his request. Since Employee A had utilized 11 of 12 permitted weeks, there should be no negative action taken, and he should be restored to his previous position without prejudice. The only caveat would be if he were not able to perform the essential...
Words: 818 - Pages: 4
...Part A – Sole Proprietorship The final control in a sole proprietorship goes to the owner directly, meaning a business is owned solely by a single individual. There are no other business partners. There are no board members. There are no stock holders. There are no department heads. The owner does not have to confer with anyone else regarding any decisions being made. The owner of the business and the business itself is viewed upon as one. As the sole proprietor of the business, the business owner is responsible for the day to day operations to include the financial success or failure of the business. As the sole proprietor of the business, profits as well as losses pass through the sole owner. This means that all income is reported to the IRS as additional income. As the sole owner of the business, the business owner is also responsible for paying federal income taxes, just as an individual does. This is required for tax purposes. This is also a benefit as the sole proprietor can take advantage of tax breaks. The sole proprietor has all the rights to retain profits and assets gained. As the sole proprietorship, there is no limit to the liability and due to limited government control, being a sole proprietor is one of the simplest businesses to start up. Because a sole proprietor is an unincorporated business, overall control falls solely on the owner of the business. If the owner decides to move to another location/state, he/she does not have to confer with anyone else;...
Words: 3535 - Pages: 15
...Sole Proprietorship A sole proprietorship is the simplest form of business entity. Factually speaking it is not an entity at all in the way that a corporation exists as a legal entity. Rather, a sole proprietorship is the person conducting business. They are conducting business on behalf of themselves, they obligate the business personally, and they are personally responsible for all liabilities. Also, no special legal filings are needed outside of compulsory licenses that might be required by local governments to conduct business in that particular locale. * Liability: With a sole proprietorship there are no limits on liability to the owner. The owner is personally liable in all legal matters and law suits can reach the owners personal assets. * Income Taxes: Profits realized through business conducted as a Sole Proprietor are taxed as personal income. This typically means at the highest marginal rates. However, expenses related to running a business have long been favored in U.S. Tax code even at the Sole Proprietor level and the deductions are taken on the owner’s personal tax return along with the profit or loss from the business activities. Sole Proprietorships are relatively simple to account for at tax time. A single page Schedule C is filled out with income (or loss) and expenses and the bottom line becomes a single entry on the owners’ personal taxes. * Longevity or continuity of the organization: Simply put, the business lasts until the...
Words: 2101 - Pages: 9
...Task 1 Part A SOLE PROPRIETORSHIP: • LIABILITY –From a legal point of view there is no distinction between the assets of the business owner and the business itself. Business assets can be used to pay personal debts and personal assets can be used to pay business debts as sole proprietorships are subject to unlimited liability. • INCOME TAXES – All income generated through sole proprietorships is considered ordinary personal income tax to the owner and is subject to the highest rate of taxation by the Internal Revenue Service. • LONGEVITY/CONTINUITY – Because the business owner and the business are the same legal entity, the business will dissolve upon the death of the owner. However, it is possible to sell or give the business to someone else. • CONTROL – Since there can be no business partners in a sole proprietorship, all control of business decisions rests with the owner. • PROFIT RETENTION – All profits generated from a sole proprietorship are income for to the business owner after all the business debts and obligations are satisfied. • LOCATION – There are no legal requirements to start a sole proprietorship on a federal level however each state has different requirements for filing for licenses and permits. • CONVENIENCE/BURDEN – The convenience of having a sole proprietorship is that the owner has full control of the business in every way. The main problem with sole proprietorships is that they...
Words: 2350 - Pages: 10
...Types and Characteristics of Business LIT Task 310.1.2-01-06 Alicia R. Wilson Western Governors University Texas Abstract In Chapter 11 of the Legal and Ethical Environment of Business, examples of business structures were described. It is clear that there are pros and cons to starting any business; however it is very apparent that it is still the American dream to start a company. The reading assignment included descriptions on Sole Proprietorship, General Partnership, Limited Partnership, C-Corporation, S-Corporation, and a Limited Liability Company. In this task, a breakdown of characteristics, advantages, and disadvantages will be described about each organizational form. Types and Characteristics of Business LIT Task 310.1.2-01-06 Sole Proprietorship Most businesses start as Sole Proprietorships because they are the easiest to begin and they are the most flexible of all the business types. There is no startup fee for a Sole Proprietorship; however a business license or permit may be required. There are many attractive advantages to being an entrepreneur and at the top of the list is being solely responsible for the start and finish of all jobs without having to share or report to anyone. Another luxury would be no set business hours or specific locations. There is certainly something to be said about waking up at noon to walk to your home office down the hall with bed head and wrinkled pajamas. Additionally, the sole proprietor is also able to pocket all of...
Words: 1782 - Pages: 8
...Lit1 Task 310.1.2-01-06 Part A Determining whether to start or invest in a business endeavor and what kind of business endeavor to choose can be challenging. Through this report the numerous types of business organizations will be assessed. By the end of the report you should have a greater comprehension of the different choices available. * Sole Proprietorship: To start off it is essential to have a clear understanding of what sole proprietorship means. As the sole proprietor you are the owner and the operator of that business. In more detail, the sole proprietor manages everything including setting up the business. An attorney is only needed if the sole proprietor plans to report the name of the business under a name other than their own. In that instance they would need to register the business with the government. * Liability: A full understanding of all liability and where it falls is very important. All liability falls on the owner on the company. This means that not only all of the company’s assets but also the owner’s personal belongings possibly will be occupied in any scenario where the company fails. More specifically, in the event that the company flops because of unfortunate market settings, poor business policy or if there is an injury suffered implicated by company products. The liability falls on the owner of the company including all characteristics of the business and can be brought into any legal actions. * Income Taxes: As a sole proprietor...
Words: 2781 - Pages: 12
...Legal Issues in Business Organizations Task 1 Zachary Christenson Western Governors University 000447824 Family and Medical Leave Act Situation The Family and Medical Leave Act of 1993 (FMLA) was created to help assist employees deal with the difficulties of home, while creating an atmosphere of job security. The FMLA also helps cover employers from wrongful use of the FMLA by the employees. Although the document is extensive, there are three major provisions of the FMLA that apply to the given situation. The FMLA entitles covered employees to unpaid work leave, provides job and benefit restoration, and allows employers to require notice and certification for leave ("Family and medical leave act," 2007). A covered employee of a covered company is entitled to up to twelve work weeks of leave during a twelve month period. The list of reasons an employee may take FMLA leave includes, but is not limited to, the birth of a child, to care for an immediate family member who suffers due to health conditions, and an employee who suffers from health conditions that do not allow employee to perform their job ("Family and medical leave act," 2007). An employee who returns from FMLA leave has the right to his/her job back, or equivalent position. The employee is also entitled to the same rate of pay, benefits, and any other terms that may have been negotiated with employee ("Fact sheet #28: The family and medical leave act," 2012). A covered employer also has protection with the...
Words: 1266 - Pages: 6
...Situation A: The Family Medical Leave Act applies to covered employers only and is provided to only eligible employees of covered employers. A covered employer is either a public agency, to include a local, state or federal government agency regardless of the number of employees. A public or private elementary or secondary school regardless of the number of employees it employs or a private sector employer with 50 or more employees. To be an eligible employee you must have been employed for at least 12 months and have at least 1,250 hours of service. The Family Medical Leave Act allows eligible employees who have qualifying family and medical reasons the ability to take up to twelve workweeks of job protected unpaid leave in a 12-month period job. During the 12 weeks leave time the employee will have a continuation of group health insurance coverage under the same terms and conditions as if the employee had not taken leave. Some of the qualifying family and medical reasons are the birth or adoption of a child, to care for a spouse, child, parent who has a serious health condition, for a serious health condition that makes the employee unable to perform the essential functions of his or her job (United States Department of Labor Wage and Hour Division, http://www.dol.gov/whd/fmla/). Company X with over 75 employees has granted Employee A who has worked for the company for 2 years FMLA leave to care for his spouse after the premature birth of twins. After 11 weeks of...
Words: 1097 - Pages: 5
