Running Head: BUSINESS LAW 1

Business Law

Name of Student

Name of Institution

BUSINESS LAW 2

Business Law

Pros and Cons of Business Structures

Corporation

A primary advantage of company is that it can accumulate large amount of resources from its

shareholders. Since there is no limit on the number of shareholders, a company can raise funds

by increasing the number of its shareholders if the need arises.

Moreover, the liability of the shareholders of a company is limited to the extent of their capital.

Private property of the members of a company is not at stake in case of limited liability. For

example, if a member has purchased a single share of $100, his liability will be limited to the

extent of $100.

Since the company have a large scale of resources, it can organize the production and operational

activities on a large scale. This result in economies in production, marketing, management and

procurement etc. economies of scale allows the companies to produce the goods at a lower cost

and thereby increasing the profits.

In company form of business, the management of a company is in many hands and everything is

discussed in annual general meetings and board meetings due to which secrecy cannot be

maintained. Furthermore, companies are also required to publish annual reports in which all the

information of the companies is present.

Finally, a large number of rue and regulations are maintained by the governments which

companies are required to follow even for their internal working. The reason behind involvement

of government is that a large amount of public money is invested in a company.

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Partnership

Partnership business are easy to establish since there are no legal formalities involved and no

legal documents are required to be prepared. Similarly, partnership can also be dissolved easily

at any time.

Due to the large number of partners, it is relatively easy for partnership business to accumulate

funds. Furthermore, credit worthiness of the firm is also high due to the fact that partners are

jointly and severally liable for the debts of the firm.

A major disadvantage of partnership is that every partner is jointly and severally liable for the

debts of the firm. In other words, a partner is not just liable for his own mistakes but also for the

misconduct and dishonesties of other partners.

Secondly, partnership business lacks continuity. It comes to an end in case of retirement,

incapacity, death or insolvency of any partner. Moreover, a partner can also not transfer his share

to any outsider without the unanimous consent of all the partners.

Sole Proprietorship

Similar to partnership, sole proprietorship business is also very easy to establish and to dissolve.

There are no legal formalities or formal documents required for the establishment of the sole

proprietorship business.

Furthermore, the sole proprietor is owner of the whole business hence he is free to take decisions

and to implement them. Since no consultations is required from any partner, the decision making

is relatively quick and efficient (Spadaccini, 2007).

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Sole proprietor is business is subject to financial constraint. The funds of the sole proprietor are

very limited and not enough to start a large scale business. Moreover, the managerial capabilities

of the owners limited since he is the only person to manage all the resources. Sole proprietor

cannot appoint professional and qualified persons due to limited financial resources.

Finally, unlike corporations, the liability of sole proprietor is unlimited which means that he is

personally liable for all al the losses incurred in the business. Hence, sole proprietor has to be

very cautious while making decisions in order to avoid losses.

The above discussion and the nature of Cardigan’s Business show that they should adopt

Partnership structure for home furnishing business.

Filing requirements

Cardigans would need to register themselves with the IRS, state and local revenue agencies; they

must also obtain a tax ID number before starting a new business. Furthermore, cardigans also

need to file an annual information return to furnish the information about their income,

deductions, gains and losses from the business (Partnerships, 2015).

In addition, partnership business would also need to file:

Annual return of income: this will be filed by using 1065 US return of Partnership

income

Employment taxes: this will include social security, Medicare taxes and income tax

withholding and, federal unemployment tax.

Choosing Business Name

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Cardigans should choose a business name very carefully since it is an important step in business

planning process. They should pick a name which should reflect their brand identity.

Furthermore, they should also check for trademark since trademark infringement can cause

severe penalties to the business. Use of US Patent and Trademark Office trademark search tool

shows that names similar to Cardihome furnishing is already registered and hence may cause the

confusion for the consumers (Choose Your Business Name, 2015). Hence, Cardigans should

pick the Homigans Fine Home Furnishing as their business name as it is distinct from the names

of the other competitors.

Moreover, Homigans Fine Furnishings is web ready, which means that the firm can easily create

website name and URL for this business name. Finally, since the business name is the most

valuable asset of the Cardigans, they should register it to protect it from infringement. They can

do so by filing a trademark which will cost around $300 to the firm.

BUSINESS LAW 6

References

Choose Your Business Name. (2015). Retrieved from sba: https://www.sba.gov/content/how-

name-business

Partnerships. (2015). Retrieved from irs: https://www.irs.gov/Businesses/Small-Businesses-&-

Self-Employed/Partnerships

Spadaccini, M. (2007). Business Structures: Forming a Corporation, LLC, Partnership, Or Sole

Proprietorship. New York City: McGraw-Hill Companies,Incorporated.