Business Law Essay Example | Topics and Well Written Essays - 750 words - 3

Business Law - Essay Example This means that there is unlimited liability and the owner will be responsible personally to repay any debts that may arise from the business. An electrical contracting business would require large amounts of capital to set up and then run the day to day activities. Such limitless capital would not be available with a single person who plans to open a new business, thus he may resort to borrowing or taking loans from lenders. This too is not a guaranteed way to acquire capital as lenders would be unwilling to invest in a new business controlled by a single person with unlimited liability. They would want the personal assets of the owner to cover their loans so that in case of default in the repayment, the assets might be used to recover the loan provided. Secondly, an electrical contracting business needs sophisticated machinery and constant supervision. A single person will not be able to control and supervise 24/7, causing mismanagement which the competition can take advantage of. However, a sole proprietorship is easy to form and dissolve as it does not include legal formalities for starting and closing a business. Although a business such as an electrical contractor would require a government license giving permission to produce and supply electricity which would require certain conditions to be fulfilled. A sole proprietor does not need to share his profits with anyone and he pays minimum income tax as he is not a partnership or a corporation which pay a large proportion of their profits in tax. Electrical contracting business as a Partnership An electrical contracting business being set up as a partnership means ownership is shared between 2 to 20 people. This means that the business will have greater capital and credit resources. A partnership is governed by the law and follows a written document known as the partnership agreement. This document contains all the provisions necessary for smooth running of the business for example managerial duties, share of profits etc. A partnership too can be formed relatively easily as compared to a company. Forming a partnership for conducting an electrical contracting service would require a government license. This license can be achieved relatively easily as compared to sole proprietor business. A partnership consists of two or more thus each person can utilize their managerial skills and benefit the business. For example a partner who is an electrical engineer can work on the machines while another partner who is an accountant can manage the accounts of the business and ensure smooth running. A partnership means the risk of the business is spread over the numerous partners thus one person does not have to take the burden. However, a partnership has unlimited liability as well. This means that all the personal assets of the partners are at risk and a bad decision by one partner can result in loss for all the partners. Being a partnership there is still a limit to the amount of capital that ca n be acquired thus the business has a limitation on the size. Lastly, a partnership will be subjected to large amounts of taxes under the law. A partnership can acquire several types of tax id numbers, e.g.  A Federal EIN Number - The Federal Tax Identification Number is used to identify a business entity and is required for employers and corporations as well as partnerships. A State Sales Tax Id - Sales tax