Business Entities, Laws and Regulations
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For each of the following business proposals, discuss the business entity that represents the best choice for each business, taking control, taxation, and liability issues into consideration. Identify laws and regulations each business must consider in starting the business, and identify risks against which each business must protect itself. For the scenario, discuss the above elements, and identify and discuss the employment laws and regulations with which the business must comply in making a decision.
1 - Restaurant/Bar
Lou and Jose plan to open a sports bar and restaurant where customers socialize and watch sporting events on large-screen TVs that hang around the bar. They do not have much money, but they do have Miriam, a wealthy investor who does not have time to participate in the business, but wants to provide capital to start the business in return for a percentage ownership.
2 - Extermination Business
Frank is a wealthy investor who plans to open a chain of exterminating businesses across the United States.
3 - Construction
Mei-Lin is the hiring manager for Surebuild, Inc., a new construction company. She has advertised a position as a jackhammer operator. The position's description states that the successful applicant must have a high school diploma. The following people apply for the position: Michelle, 35, who appears to be pregnant, is a high school graduate, and was formerly employed as a jackhammer operator; Eric, 55, who is experienced with a jackhammer, but has no high school diploma; Felipe, who is 38, speaks no English, has no high school diploma, but is experienced with a jackhammer; and Nick, 23, a college graduate who is epileptic, and has no experience with a jackhammer.
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Solution Summary
For each of the following business proposals, discuss the business entity that represents the best choice for each business, taking control, taxation, and liability issues into consideration. Identify laws and regulations each business must consider in starting the business, and identify risks against which each business must protect itself. For the scenario, discuss the above elements, and identify and discuss the employment laws and regulations with which the business must comply in making a decision.
1 - Restaurant/Bar
Lou and Jose plan to open a sports bar and restaurant where customers socialize and watch sporting events on large-screen TVs that hang around the bar. They do not have much money, but they do have Miriam, a wealthy investor who does not have time to participate in the business, but wants to provide capital to start the business in return for a percentage ownership.
2 - Extermination Business
Frank is a wealthy investor who plans to open a chain of exterminating businesses across the United States.
3 - Construction
Mei-Lin is the hiring manager for Surebuild, Inc., a new construction company. She has advertised a position as a jackhammer operator. The position's description states that the successful applicant must have a high school diploma. The following people apply for the position: Michelle, 35, who appears to be pregnant, is a high school graduate, and was formerly employed as a jackhammer operator; Eric, 55, who is experienced with a jackhammer, but has no high school diploma; Felipe, who is 38, speaks no English, has no high school diploma, but is experienced with a jackhammer; and Nick, 23, a college graduate who is epileptic, and has no experience with a jackhammer.
Solution Preview
Let's look at this and talk about each of your three scenarios.
1 - A bar has enormous amounts of liability. You have to consider the possibility of anything alcohol related -- fights, damage to cars in parking lots by those leaving intoxicated, bartenders who continue to serve patrons that are intoxicated and the liability it can cause when the patron then gets into a fight or car accident. This is also a restaurant, which means there is also the chance of people getting sick. No matter how clean and careful restaurants are, there is always the chance of receiving spoiled food from a vendor and not knowing it before the food is prepared and served. In addition, we're mixing alcohol with sporting events, and people can become very passionate about their favorite teams. Mix this with drunk people, and we could be headed for disaster.
The only realistic choice for our entity type is an LLC. The limited liability corporation limits the amount of liability and protects the owners more than any other entity type. This is what we want for this kind of business. We would also want a substantial business insurance policy for the "just in case" events associated with food and alcohol. Lou and Jose need to register as an LLC with the IRS. They also need to obtain the proper liquor and food licenses from the state, and they also need a food service permit from the county where the business is located. They'll also need ...
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