Legal Underpinnings of Business Law

Legal Underpinnings of Business Law

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Legal Underpinnings of Business Law

Tinker’s Home Security Service (sole proprietorship)

As a sole proprietorship form of business, the venture was easy to set up, and it warranted the need to include income on the personal tax returns. A sole proprietorship is considered the most basic form of business that exempts a person from any formalities associated with corporate companies (Schwidetzky & Brown, 2015). While this is the case, Tinker’s Home Security Service possesses unlimited personal liability that poses a significant challenge for the owner. Unlimited personal liability identifies that the owner and the business do not exhibit any legal distinction. Therefore, in the case of a legal issue, business creditors and people seeking claims against the venture may confiscate the business assets or the owner’s assets. Similarly, the proprietor is also placed under immense liability that demands one person be held accountable for the actions of the business. To reduce liability exposure, the owner needs to conduct financial operations that do not present a high risk of attracting lawsuits to protect the owner’s assets from being potentially seized.

Tinker & Tailor’s Home Security Service (general partnership)

            A general partnership business ensures that partners and owners share in the management as well as the liability of the organization. In this company, the partners possess varying percentages of the legal obligations and duties as highlighted in a partnership agreement (Smith, Raabe, & Maloney, 2003). The business primarily consists of two partners, which eliminates the need to document management decisions regarding the operation of the venture. In a general partnership, each associate possesses unlimited personal liability. The implication is that it is the legal responsibility of all partners to settle arrears incurred by the company. In case one partner enters into debt or approves a bad contract, the legal partners remain vulnerable to lawsuits. The percentage of ownership among general partners of Tinker & Tailor’s Home Security Service does not matter in such cases. To reduce liability, partners need to understand and limit the nature of involvement in activities that may render either partner at a disadvantage.

Tinker & Tailor’s Home Security Service (LP)

            A limited partnership business consists of a general partner and limited partners. It is created formally under state law. The company is prone to taxation consequences. The general partner in this business is responsible for the daily operations and decision-making processes (Emanuel, 2013). Such a partner is granted the opportunity to make changes to agreements and associations pursued by the business. Therefore, the general partner is liable for all business obligations rendering them vulnerable to confiscation of personal assets in case the company goes bankrupt or faces a lawsuit. On the other hand, the limited partner possesses no obligation or active role in the daily operations of the company. To reduce liability for the general partner in Tinker & Tailor’s Home Security Service, the venture may include the scope of exposure based on the amount that the partner invested into the firm.

Tinker & Tailor’s Home Security Service, Inc. (corporation)

            Tinker & Tailor’s Home Security Service, Inc. is a corporation formed by six people. The founders choose a corporation because it safeguards their personal assets from any liability and obligations that may arise from business operations. Corporations operate as “persons” in most nations as they are considered entirely separate entities. Tinker & Tailor’s Home Security Service, Inc. was created under state law, and it is subject to formal statutory regulations. The owners possess limited liability associated with any financial, accounting, or legal issues (Emanuel, 2013). Among the debt obligations that the corporation Tinker & Tailor’s Home Security Service, Inc. may be associated with is a tax cut that is in a similar manner to any partnership or a limited liability company. To reduce exposure to liability in corporations involves a guarantee that business operations are carried out legally and separately from personal activities. Owners need to ascertain a distinction between their property and that of the business.

Tinker & Tailor’s Home Security Service, LLC (LLC)

            Tinker & Tailor’s Home Security Service, LLC is a limited liability company with three owners. The business structure renders all owners limited liability partners in case the company possesses any debts. Tinker & Tailor’s Home Security Service, LLC interests, and activities of the owners, are safeguarded from any claims issued by personal creditors. The business is subjected to double taxation on their profits. In such cases, creditors or lawsuits may expose the investment amount that owners have installed into starting and operating the business (Smith et al., 2003). Nonetheless, Tinker & Tailor’s Home Security Service, LLC owners possess a professional obligation to their clients and business associates. To reduce exposure to liability in an LLC, owners need to ensure that the company follows all structural and operational procedures highlighted in its agreements. The company can also impose restrictions particularly in those who may become owners.

Real Estate Business

            Real estate is one of the businesses that I purpose to own in the future. The best business organizational form for a real estate business is a limited liability company, LLC. The rationale underlying such a business form is the nature of simplicity and flexibility that is employed in its formation. An LLC protects its owner’s assets from the company debts. In case the company goes bankrupt, the risk of personal exposure is minimal as the individual will be protected by the legal obligations of the business form (Schwidetzky & Brown, 2015). An LLC allows owners to issue a report on their profits in the personal income tax return. In such cases, the company is exempted from taxation. The LLC may also be used with asset protection strategies that act as an extended protection plan.


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Emanuel, S. (2013). Corporations: And other business entities. New York, NY: Wolters Kluwer Law & Business.

Schwidetzky, W. D., & Brown, F. B. (2015). Understanding taxation of business entities. Danvers, MA: LexisNexis.

Smith, J. E., Raabe, W. A., & Maloney, D. M. (2003). An introduction to business entities. Mason, OH: Thomson/South-Western.

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