Business Law Term Paper Example | Topics and Well Written Essays - 750 words

Business Law - Term Paper Example An LLC is a flexible business entity that combines the elements of a partnership and that of a corporation. It provides limited liability for its members. Limited liability implies that the liability of a member is limited to a certain sum, which in most cases is the value of the members contribution to the business. A shareholder in an LLC is not personally liable for any liabilities incurred by the entity unless to the extent of their investment in the entity. This business model is ideal for Paul as it will allow him to form the business with both Sara and Ronald. Compared to a partnership, an LLC does not give joint or individual liability. In a partnership, partners are not only liable for the actions undertaken by the entity but also liable for their actions. A corporation, on the other hand, is not preferred due to the costs and time involved in its incorporation. Incorporating a business requires additional paper work compared to an LLC because they are highly regulated. Addi tionally, corporations are taxed twice, that is because the companys profits as well as the dividends paid to its shareholders incur taxes (Baden-Fuller & Morgan 2010). The steps involved in forming an LLC include choosing and registering a business name, which must not be similar to that of any registered entity and should indicate that the business is an LLC. It is also a requirement to file articles of organization. These are documents which contain the name of the business, its address and the names of its members. Equally important is the creation of an operating agreement, which stipulates the rules and regulations for the operation of the business. Operating agreements often include allocation of profits and losses, rights and responsibilities of members, and other provisions that allow the business to operate smoothly. Pauls idea of charging less prices in order to veer off