Business and Economics: Comparing Legal Entities

Subject: Case Studies
Pages: 3
Words: 887
Reading time:
4 min
Study level: Bachelor

The two business partners appear to be at variance concerning the legal entity that the enterprise should assume, with the retailer agitating for the corporation route. At the same time, the farmer prefers either a general partnership or a limited liability company. A corporation denotes a legal entity that is distinct and separate from the owners. Legally, corporations have similar responsibilities and rights as individuals, meaning they can enter contracts, borrow money, issue loans, pay taxes, own assets, hire employees, sue, and face lawsuits.

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As a result, taxation laws for corporations are different when compared with LLCs and general partnerships. Federal income tax laws recognize corporations as distinct tax-paying entities (Rock, 2021). Thus, corporations conduct business, achieve losses or profits, remit taxes, and distribute profits amongst shareholders. The profit accrued by the corporation undergoes taxation, and the shareholders also face further taxation upon receipt of the dividends. Hence, there is double taxation for corporations.

Corporations limit the liability of the shareholders (owners). Legally, shareholders do not bear the burden of personal liability for the corporation’s debts. Hence, creditors collect their debts by moving in for the corporation’s assets. Nevertheless, shareholders can shoulder liability in the event of breaches to corporate formalities, such as commingling personal funds to shield liability. Rock (2021) reckons that, for corporations, ownership and control are separate. The business owners (shareholders) have no direct/ little control over management decisions. The decisions can result from a specially installed board, such as the external decision-making influence that the retailer desires for the proposed venture.

On the other hand, the farmer prefers a general partnership-type of business. A general partnership refers to the coming together of two or more partners to create a business entity that they run together. In general partnerships, the businesses are mere pass-through entities that do not pay tax. According to Lupulescu (2017), the individual owners report their share of the venture’s losses and profits on their individual tax returns and remit their taxes appropriately. Hence, the taxation for general partnerships resembles self-employment income taxation.

Furthermore, as per the law, general partnerships are not separate business entities. Thus, individual partners are liable to lawsuits brought against the venture. Herein, the law provides for seizing personal assets to settle unpaid debts. Moreover, each partner remains responsible for the debts and actions of other members, making it riskier. In terms of ownership and control, general partnerships are flexible and allow different privileges and areas of responsibility of each partner (Lupulescu, 2017). General partnerships can distribute profit shares and voting rights as they deem fit but cannot alter the law on joint liability. In general partnerships, each partner has the authority and decision-making capacity to manage the entity.

Employer’s Ethical and Legal Obligations

The Occupational Health and Safety Act, signed into law in 1970 by President Nixon, seeks to ensure workers’ safe and healthy working conditions. The act aims to achieve this by offering needful assistance, education, outreach, and worker safety issues. Moreover, OSHA enforces various whistleblower regulations and statutes and conducts workplace safety inspections to lower injuries (Ward, 2021). Consequently, the law requires that the employer takes the responsibility of providing a safe workplace.

According to the case study, the business does not provide hand trucks to its employees to help them move the heavier boxes. In the end, an employee strained their back while carrying a heavy pack. According to the act, the employer has the legal duty to provide a workplace devoid of serious hazards by identifying and correcting safety and health concerns. Any neglect of the employer to do that may result in hefty lawsuits and financial damages for the entity.

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1938’s Fair Labor Standards Act (FLSA) established specific requirements concerning labor practices in the United States. Among other things, FLSA came up with guidelines concerning youth employment standards, record-keeping, overtime pay, and minimum wage (Martiniano, 2021). The act obliged employers to pay overtime dues for work covered beyond 40 hours per week without discrimination on age and gender.

As a result, the employer has an ethical obligation to pay all employees who work overtime on the weekends in the case study. The employer denied the workers overtime pay by claiming that the stated overtime goes into management training and investment into career development. The behavior isn’t very ethical since only the female workers undergo such even though they have similar qualifications as their male colleagues. The employer should be honest enough and remit the overtime payment and cease gender-based discrimination at the workplace. They should also avoid the temptation to retaliate against employees who speak up.

Employees’ Ethical Obligations

The employees have an ethical obligation to raise their concerns with the administration. Failure to do so would jeopardize future employees’ lives, health, and welfare at the venture. Even though their actions of speaking up may prove costly, they have the ethical duty to ensure that those who come after them enjoy better working conditions. If the administration does not heed their calls for reforms, the employees should proceed and contact the nearest OSHA offices next to them and inform them of their plight. They can also hire lawyers to help them wade through the legal issues surrounding overtime payment and gender-based discrimination. Such is their ethical obligation to ensure a better tomorrow for workers, regardless of the short-term costs on themselves.

References

Lupulescu, A.-M. (2017). Some considerations on the general partnership. Juridical Tribune / Tribuna Juridica, 7(2), 6–16.

Martiniano, N. (2021). Intern’s Lament: Distinguishing an Employee and an Intern Under the Fair Labor Standards Act. Penn State Law Review, 126(1), 307–336.

Rock, E. B. (2021). For Whom Is the Corporation Managed in 2020? The Debate over Corporate Purpose. Business Lawyer, 76(2), 363–395.

Ward, B. (2021). More OSHA scrutiny on healthcare organizations expanded whistleblower protections…Marge McFarlane. Healthcare Life Safety Compliance, 24(7), 6–8.

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