Business Laws - Entities and Regulations

Business Laws, Entities and Regulations

Business Laws, Entities and Regulations

Starting and running a business is a goal rife with rules, regulations and business decisions that must be carefully weighed to ensure success and perpetuation. Liability issues, what type of entity to form, taxes, and employment laws all must be taken into consideration before a business can become successful. Here we will discuss how two new business entities should be formed and what issues must be considered for their success. We will also take an in-depth look at an already formed business's hiring practices and levels of compliance.

Professional Practice: Akiva and Tera's Birth Clinic

Akiva and Tara are going to open a general partnership birth clinic in Oshkosh, Wisconsin. The first step is to determine the name of their clinic and register it with the State of Wisconsin. The next step is to get an Employee Identification Number (EIN) from the IRS. This is a federal tax number that is used to identify the business for tax reporting and employment purposes. Akiva and Tara will have to register for specific tax identification numbers, income tax withholding, sales tax and unemployment insurance tax.

Oshkosh requires business owners to register for an Oshkosh Occupational Business Tax License. In order for Akiva and Tara to open their clinic they will have to get a zoning permit that allows for a medical practice, and obtain a degree of doctor of medicine license from the state of Wisconsin.

Medical malpractice is a huge risk for Akiva and Tara because a birth clinic is classified as a medical establishment. Medical malpractice is an act or omission which causes injury or death to a patient; birth injury itself is a separate classification which includes improper labor practices (Get Legal, 2011). General liability insurance is mandatory for Akiva and Tara to open their business and covers injuries unrelated to malpractice. The clinic will also need property, workers compensation, and employment practices liability insurance. These coverages will help protect them against most types of theft, bad weather, building problems, employee injuries, and any potential employment practices they might be sued for violating (hiring and firing practices, sexual harassment, etc.)

Professional Practice: General Partnership

The birth clinic that Akiva and Tara plan to open will be set up as a general partnership. The decision to create this type of partnership is based on their education, experience, and the ability to manage the day-to-day operations mutually. Akiva and Tara will be applying for a loan together and splitting all the expenses needed to maintain the business. A general partnership is a voluntary association of two or more persons for carrying on a business as co-owners for profit (Cheesman, 2010). Each one of the partners will be responsible for the debts incurred with the business, as well as receive the profits, equally. Although it is not necessary for formalities in a general partnership, it is a wise idea to put all agreements in writing by creating a partnership agreement. The agreement would indicate the rights of each partner in relation to management, profits, and the ability to review the partnership should the need arise.

Partnerships do not pay federal income taxes. Instead, the income and losses of a partnership flow onto and have to be reported on the individual partners' personal income tax returns (Cheeseman, 2010). General partnerships work well for professional practices, as long as each partner is compliant with the partnership agreement.

Restaurant and Bar: Lou and Jose's Sports Bar

Best friends Lou and Jose want to open a new sports bar restaurant in Scottsdale, Arizona to attract sports fans all across from all areas of the Valley of the Sun. The only problem is they have no capital to get going. Miriam comes to Lou and Jose and tells them that she will provide the funds for the sports bar, but only wants to be a silent partner and receive a return on her investment.

The first step Lou and Jose must do is figure out the name of their LLLP and register it with the state of Arizona with the secretary of state. Then they will want to choose a location for the sports bar and gain building and zoning permits from the city of Scottsdale at City Hall. Then Lou and Jose will decide who will be the general partner and other duties and responsibilities each person will be responsible for within the company. Then the company will have to get an employer identification number (EIN) from the internal revenue service (Business.Gov, 2011).

The next step is hiring a business and tax lawyer to set the structure of the business and set tax guidelines for both federal and state taxes for employees, sales tax and other taxes required by the state of Arizona and the city of Scottsdale. Food and liquor licenses must be obtained before Lou and Jose can open their doors and legally serve food and alcohol.

The risks in opening a restaurant that serves alcohol is serving to minors without checking ID's and serving to much booze to other patrons who may have had too much to drink. The restaurant will want to gain liability insurance so the business will be protected in the event of a suit. Because Miriam is a silent partner in the LLLP, should a suit arise from operations