Business Law 12
(i)An acquaintance of yours wishes to set up a business with his friendand intends to run the business as a general partnership. Present himwith a series of arguments which will persuade him that running thebusiness through a limited liability company would be a much betteroption. 1250 words
Alimited liability company (LLC) is a legal entity that provides thelimited liability features to the shareholders (Shenkman, 2003). Ageneral partnership involves two or more individuals who voluntarilycome together and agree to own and operate a for-profit business inwhich they equally share management responsibilities, profit andlosses (Martin, 2011).The owners of a partnership are referred to aspartners while for an LLC are referred to as members. Depending onthe company regulations, members can consist of a single person (oneowner), two persons or more individuals.
Advantagesof a Limited Liability Company over a general partnership
Inany business setting, an entrepreneur is a self-starter who desiresto map their courses. In the UK, and in a majority of states inAmerica, one owner (single ownership) limited liability companies arerecognised and this means one individual can be the sole owner of abusiness enterprise (Martin, 2011). In such a form of business, anindividual can make business decisions without consulting anotherparty provided the business laws in the state in question are notcontravened (Shenkman, 2003). One does not need approval from anyother partner like is the case in a general partnership. In a singleowner LLC, an entrepreneur operates like a sole proprietor, meaningyou own, operate and manage the business enterprise, but in this casewithout the liability issues of a sole proprietor. Even in thearrangement where there are two or more owners it is still mucheasier to chart the course of business in a limited liability companythan a general partnership (Martin, 2011). Owners in an LLC can enterinto an operating agreement that spells out the respective roles,duties responsibilities, and obligations of every member. The memberscan also structure the business in a way that suits the needs ofeveryone (Martin, 2011). Such agreements and arrangements are onlyfeasible in a limited liability company, and they come with immensebenefit to the business and the members. First, one of the majorproblems in a partnership is disagreements and conflict amongpartners. The fact that the liability of a partnership is not limitedto the amount of capital ejected to the business means that allpartners can lose their private properties to pay liabilities. Thismakes it difficult to share duties and adjust the enterprisestructural framework to fit the interest and needs of all partners.Suspicion makes it hard to accomplish and execute agreements relatingto management and sharing of roles and obligations (Martin, 2011).
Limitsyour Liability: A limited liability company is viewed as legal entitydistinct and separate from its individual owners. Just likestockholders in a corporation, a limited liability company owner isnot personally liable for the company’s debts and legal liabilities(Shenkman, 2003). A member in a limited liability company can onlylose their capital invested to the enterprise just like shareholders.However, unlike the general partnership the legal obligation ofmembers in an LLC normally do not put the company’s owner’spersonal properties and assets such as bank balances and homes atrisk (Shenkman, 2003).
Flexibilityin Sharing Profits: In most cases, profit in a general partnership isdistributed based on the partners’ capital contribution orproportion of ownership interest. Under normal circumstance, partnersare expected to share the losses and profits equally (Marson, 2013). However, in a limited liability company the members retain theflexibility to determine the manner in which profits are shared underthe terms of the company’s operating agreement. Members in alimited liability company are not limited by their proportion ofownership and can opt to divide up profits in a different fashionthey deem appropriate (Shenkman, 2003). For instance, a particularmember may agree to receive less than their proportional share inprofits if another member has more responsibility or puts moreefforts in the daily operations of the company. Although An LLC isnot allowed under the business law to dole out profits in the eventthat such an endeavour may threaten the company’s solvency or inthe circumstance when the company’s liabilities are equal orgreater to than the total assets, the flexibility in sharing profitsis pivotal in diverting conflict while encouraging activeparticipation for the benefit of the company (Marson, 2013).
Anotherfacet that gives the limited liability company an advantage over ageneral partnership is when the parties desire to preclude any onemember from exposing the organisation to bankruptcy dealings(Shenkman, 2003). Under the Bankruptcy Code, while unanimous approvalof the general partners is requisite to file a voluntary petition onbehalf of the partnership, it appears that nay member has the power,even if he or she has agreed not to do so, to file an involuntarypetition against the partnership (Marson, 2013). By contracts,stockholders who are not also creditors cannot file an involvementpetition against a company
Itis also easier for a limited liability company to raise money. An LLChas numerous avenues through which it can generate capital to supportvarious business activities. In case the initial members are not in aposition to raise enough capital, new members can be admitted intothe company by selling membership interest (Marson, 2013). In such acase, the company creates new members with new classes of membershipinterests with different profit features and voting characteristic.Unlike in a general partnership where admission of new members isdifficult since the current partnership must be dissolved and a newone formed incorporating the new investors, an LLC does not encountersuch setbacks and cumbersome processes (Marson, 2013). It is alsoeasier to attract investors since they have an assurance that theirpersonal assets cannot be claimed to cover for the company debts likein the case of a partnership.
AnLLC would be a better option because of the ease of ownershiptransfer. Ownership interest in an LLC may generally be sold to newmembers without affecting the current operations of the business(Martin, 2011). A general partnership cannot be sold while, rathereach of its permits, assets and licenses must be individuallytransferred. In such an arrangement, a new tax identification numberand bank accounts are also needed.   Even though apartnership agreement may contain provisions handling the departureof a partner, in the event where such important element is absent ordoes not allow departure, conflict is inevitable (Cox,2011).Even when the agreement succinctly spells out the process, theoptions available that would not affect the operation of thepartnership is the purchase of the share of the departing partner. Inthe event that the remaining partners do not have resources to buysuch shares, the future of general partnership becomes increasinglyunpredictable (Cox,2011).Death of one partner may also be a source of immense setbacks thatmight lead to the collapse of the partnership. A limited liabilitycompany is a legal entity that operates separately from its own andhence it continues to exist even after the death of one member (Cox,2011).
Anotherelement that makes an LLC a better option is the fact that obligationincurred by a partner in a general partnership before death ordeparture must be paid. Departure does not release a general partnerfrom obligation to pay debts incurred when such a partner was in thegeneral partnership (Cox,2011).Also, an LLC has a standard structure that is recognised by theinternational community. This makes an LL a trusted ad credible formof business, which makes it easy to transact business within andoutside the British borders (Cox,2011).
Inconclusion, LLCs are business entities that possess special blend offavorable legal and business features that do not exist in any otherform of business. Unlike general partnership where a general partnerparticipates in the management with the risk losing personal assetsif the business incurs debts it is not able to pay, an LLC does notexposure members personal assets to such a risk. There are no suchobligations in a limited liability company. LLC are also flexible,have a formal structure and hence are accepted beyond the borders ofthe country, and have perpetual existence meaning the death of amember does not have significant effects of the operations of thecompany. LLC s are also able to raise capital needed with easethrough the sale of stock.
ii)Employers have a duty to ensure that their employment practicescomply with the law. The consequences of not complying with the lawcan lead to employees making expensive claims against theorganisation. The Equality Act 2010 (EA 2010) brought previousequality legislation under EA 2010 and strengthened some of it.Advise your client, who employs 100 people, what steps he needs totake to comply with this law and avoid the expensive claims referredto above. Where appropriate, refer to other legislation.
FormOctober 2010 much of equality law developed through the UK membershipof the EU, the common law, and other statutes were codified in the EA2010. There have been immense changes adopted following the passageof this legislation ((British Chambers of Commerce. 2011). The Actis very relevant to employers and all business entities because itimposes obligations to offer a safe system f work, including thecontrol and regulating activities of top executives, the workforce,and the third parties involve in one way or another in the operationsof a business entity.
TheEA 2010 replaced the antidiscrimination laws that used to existbefore 2010 with a single Act. It eliminates inconsistencies andsimplifies the law, making it much easier for business, employers,employees and other people to understand and comply with it (TheNational Archives, 2011). The EA 2010 also strengthens the law insignificant ways to help address inequality and discrimination. TheEA 2010 covers the same categories of people previously protected bythe laws that existed before the legislation. This includes age, sex,disability, marriage and civil partnership, race, gender, sexorientation, pregnancy and maternity, gender reassignment, andreligion (Hepple, 2010). These groups of people are now called the‘protected characteristics’. Save for the pregnancy andmaternity, individuals who are protected by the EA 2010 do notactually have to possess the feature themselves (British Chambers ofCommerce. 2011). The law protects such individual even in thecircumstance where they are wrongly perceived to have specificcharacteristics or because they link with individuals who have thecharacteristic.
Asa matter of good business and practice, employers should treat everyindividual accessing the organisation’s facilities, products, andservices regardless of their sexual orientation, gender, religion,age, disability, race, gender reassignment with respect, fairness andguard against making suppositions about the characteristic of anindividual (The National Archives, 2011).
Underthe provisions of the EA 2010, a business cannot discriminate againstmothers who are breastfeeding a child of any age. The law hassuccinctly spelled out that it is unlawful for a business todiscriminate against a woman because she is breastfeeding a child(Equality and Human Rights Commission, 2012). This does not mean thata business can not ask a breastfeeding woman to leave their premisebut the idea is that the basis for doing so should not be prompted bythe fact that she is breastfeeding (British Chambers of Commerce.2011).
Anemployer or any business should make sure that women who work andvisit the business premise are allowed to breastfeed in the premiseif they wish to do so. The owner of the business should also see toit that mother breastfeeding babies are not discriminated against,regardless of the age of their babies (British Chambers of Commerce.2011). Efforts should be made to train employee, especially those whoare in the human resource department, to be aware of the protectionfrom discrimination accorded to breastfeeding women under the EA2010.
Employersneed to ensure that there is no discrimination or harassment of atranssexual person, when providing products, services or facilities(British Chambers of Commerce. 2011). A transsexual person isprotected if they are under medical process to alter theirphysiology, their sexual attributes such as attire and names or evenwhen they signal they are planning to do so. From the moment thatsuch a person indicates that they intend to change their sex, the EA2010 gives them protection even if they opt to change their stancelater (Equality and Human Rights Commission, 2012). An employer mustmake sure that transsexual persons in the business and people withthem are accorded fair treatment. All employers should remember thatthe transsexual matter is a very sensitive issue, hence it essentialto consider the views the transsexual persons within the organisationwhen making decisions that impact on their general welfare andtreatment. Most importantly the privacy and dignity of thetranssexual employee needs to be accorded serious consideration(British Chambers of Commerce. 2011).
TheEA 2010 recognises that in order for business entities and employersto be in a position to ensure equality for disabled employees withinthe organisation and other that may want to work in the organisation,there must be radical changes in the way that employment isstructured, the removal of physical barriers and even offeringadditional support for a disabled employee or job applicant (Equalityand Human Rights Commission, 2012). This imposes a duty uponemployers to make reasonable adjustments at the work places toaccommodate all individuals. The duty to make a reasonable adjustmentis meant to ensure that all the physically challenged employees’within the organisation can access everything they required that isneeded to complete their tasks just like a non-disabled person(Hepple, 2010). An employer must take an initiative to eliminate,prevent and reduce the barriers that a disabled person working in theorganisation, those visiting the business or even a job applicant mayencounter. Nonetheless, the duty to inform the employer that anemployee has a disability rest upon the individual affected. It isalso important to note that what constitute ‘reasonable’ variesfrom one organisation to another depending on size, resources andnature of the employer’s organisation (Equality and Human RightsCommission, 2012). .
Anemployer should remain agile and anticipate what reasonableadjustment they need to make, and supplementary assistance thatdisabled persons need so that they will not be at a substantialdisadvantage in relation to individuals without disabilities(Equality and Human Rights Commission, 2011). In addition, stepsshould be taken to formulate procedures and policies that putdisabled people at a disadvantage are altered or totally ended. .
TheEA 2010 also spells that men and women in the same employment who areperforming equal tasks and duties should have equal remuneration. TheEA 2010 provisions define ‘equal work’ as work is that has beenrated as equivalent under an analytical job evaluation scheme. Italso entails work of equal value, broadly similar or work that isequal based on the demands of the job (Equalityand Human Rights Commission, 2012). The term “demands” denotes physical and mental effort,knowledge, skills and responsibilities that a particular job requires(Hepple,2010).This means that an employer ought to develop a dependable way ofevaluating whether jobs are of equal value. An assessment scheme thatconsiders the types of jobs that the employees do is also vital toensure proper remuneration. This scheme will reduce the risk of equalpay claims (Hepple,2010).An employer can also avoid costly equal pay claims by introducing anequitable and fair pay system, and a comprehensive job evaluationsystem
TheEA 2010 allows the employer if necessary to take a’ protectedcharacteristic’ into consideration when making a decision who tofill various posts in the organisation or deciding who to promote(Equality and Human Rights Commission, 2011). Nonetheless, this canonly be done if the job applicants are as qualified as each other fora given post. This does not mean that the candidate has to possessimilar qualifications but that the selection evaluation on a rangeof measures rates them as equally capable of performing the task.
Anemployer must always create an environment that gives everyindividual a chance to discharge their duties freely and fairly. Equity in employment recruitment, placement and promotion will go along way in avoiding claims that may injure the organisation. Ensuring the rights of all individual as required by the EA 2010 areupheld is the surest way to avoid claims from employees.
BritishChambers of Commerce 2011. EqualityAct 2010: What Do I Need to Know? Quick-Start Guide for BusinessesWho Sell Goods and Services.Retrieved fromhttps://www.gov.uk/government/uploads/system/uploads/attachment_data/file/85008/business-quickstart.pdf
Cox,J 2011. Businesslaw.Oxford: Oxford University Press.
Equalityand Human Rights Commission 2011. EqualityAct 2010 Code of Practice.Retrieved fromhttp://www.equalityhumanrights.com/sites/default/files/publication_pdf/employercode.pdf
Equalityand Human Rights Commission 2012.Yourrole as an employer under the Equality Act.Retrieved fromhttp://www.equalityhumanrights.com/sites/default/files/uploads/documents/Old_Guidance/PDFS/Business/your%20role%20as%20an%20employer.pdf
Hepple,B 2010. TheNew Single Equality Act in Britain.The Equal Rights Review, Vol. Five (2010)11 TheEqual Rights Review, Vol. Five (2010)
Marson,J 2013. Businesslaw.
Martin,A. R 2011. Limitedliability company & partnership answer book.Austin [Tex.: Wolters Kluwer Law & Business.
Shenkman,M. M., Weiner, S., Taback, I., & Thomson Gale (Firm) 2003.Startinga limited liability company.Hoboken, N.J: Wiley.
TheNational Archives 2011. EqualityAct 2010.Gov. UK. Retrieved from http://www.legislation.gov.uk/ukpga/2010/15/notes