Week 1 Assignment - Running Head LIMITING LIABILITY 1...

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Running Head: LIMITING LIABILITY 1 Business Models and Limiting Liability XXXXXXXX BUS670: Legal Environment Instructor: Timory Naples July 27, 2015
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LIMITING LIABILITY 2 Business Models and Limiting Liability One of the many things to consider when forming a business is what structure to use to maximize benefits and avoid liability. The different structures can range anywhere from a single person running a business to partnerships with many people involved in operating an organization. The five most common organizational structures include the sole proprietorships, partnerships, limited partnerships, corporations, and limited liability companies (LLCs) (Seaquist, 2012). In this essay, a home security company representing each type of business structure will be analyzed in response to a hypothetical lawsuit suing for breach of contract. The analysis will include a matrix depicting each type of structure and the personal liability exposure that the owner can be exposed to in the breach of contract lawsuit. In addition to the matrix, each type of business structure will be examined for measures that can limit the liability exposure of the owners. Finally, an organizational form will be detailed for a proposed business that details personal liability exposure, management, taxation, and ease of formation that can be expected. Business Structure Matrix Business Structure Liability Exposure to Owner Tinker’s Home Security Service (sole proprietorship) Owner has unlimited personal liability for all debts incurred by the business. Tinker & Tailor’s Home Security Service (general partnership) Partners are jointly and individually liable for any debts incurred by the business. Tinker & Tailor’s Home Security Service (limited partnership) Limited partners’ liability is based on their proportion of contribution to the business with general partners facing unlimited liability Tinker & Tailor’s Home Security Service, Inc. (corporation) Shareholders are liable up to the amount of their investment. If there is corporate malfeasance, owners are subject to unlimited personal liability.
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