| BUSINESS NAME | BUSINESS TYPE | OWNERSHIP | CONTROL | LIABILITY | HOW TO LIMIT LIABILITY EXPOSURE |
| Tinker’s Home Security Service | sole proprietorship | Individually owned | Fully controlled by the owner | The owner is completely responsible for any debts | Register some personal property under a spouses name to avoid liability loss (Wheelen et al., 2017). |
| Tinker Tailor’s Home Security Service | general partnership | Two or more business entities or individuals own it | Control is exerted according to the partnership agreement crafted on inception | All partners have to bear the costs of any liability so the owner is partly responsible | Register some personal property under a spouses name to avoid liability loss as a result of partners errors |
| Tinker Tailor’s Home Security Service | Limited Partnership | Two or more general partners and limited partners | General partners run the business according to agreement and they may dissolve according to their discretion | General partners bear costs of liability so the owner is responsible to the extent of his capital contribution | Distribute the company assets among the different companies to avoid total loss during liability suits |
| Tinker Tailor’s Home Security Service, Inc. | corporation | Unlimited number of share holders | Managed by a board of directors according to the applicable legal requirements | Individual liability is according to the shareholders capital contribution so the owner distributes the losses | Do not register any company assets so that in case of law suits, there is no need to respond ( Kinicki et al., 2015). |
| Tinker Tailor’s Home Security Service | Limited Liability Company | One or more members | Managed according to the agreement set up by members | Liability is according to capital contribution so the owner shares the liability with shareholders | Do not register any company assets so that in case of law suits, there is no need to respond |
How to Limit Liability Exposure
The overall way to limit liability in case of lawsuits is to include a limited liability clause in the contract. This clause can protect the company to up to 90% of any possible liability. Though some statues often disallow the application of this clause in legal suits, most of them tend to support it. Those that do not allow it often give some leeway that allows the aggrieved party to negotiate the validity of the clause. There are a few ways to ensure that the phrase is acceptable before a court of law. The drafting and the type of words used will determine how enforceable the clause is (Cheney et al., 2015).
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First, the location of the clause within the contract is critical. It must be placed in the document in such a manner that allows it to be visible to the other party. This implies that it cannot be included as fine print. Ideally, it should be on its own, own page for the avoidance of doubt. If it happens to be a part of another page, it should be underlined or written in bold print. The words in the clause must be very clear to avoid any double meaning that may be misinterpreted in court. The text must have a clear and concise single meaning. Before the contract is signed, the two parties must discuss and agree on the liability clause. This will allow for exhaustive negotiations, and both parties will be bound to whatever they agree to. Lastly, every draft of the clause that was made during negotiations must be retained as proof of negotiations. This includes the original liability clause (Carney et al., 2015).
Business venture
My first business venture was a car wash. It is a fully equipped and automated shop that requires only a few members of staff. It is registered as a closely held corporation. My brother and sister are enlisted as the company incorporates and they double up as the only permanent members of staff. The company does not own any assets and the property where the car wash sits has been contracted under a lease agreement that is renewable every five years. This arrangement is suitable for legal accountability and for any other contractual process that the car wash may need to enter into (Julius, 2017).
This business organisational form was the best choice at the time because it offered some semblance of protection in the case of any liability as a result of wrong business decisions. I was not willing to risk my property for a business venture, so I avoided registering the business as a sole proprietorship. This is why the property under the car wash is leased instead of being registered as a company asset although I own both. I avoided a partnership as well because I wanted to avoid the bureaucratic process of decision making. In the course of the businesses history, any money borrowed to fund processes such as expansion are registered as personal loans. This way, I have a sole say in any decisions made regarding the business. The arrangement simplifies the implementation and management of every aspect (Kopczuk et al., 2014).
This is not the only reason why I chose this type of business registration form. The business registration was relatively easy. I wrote down the Articles of Incorporation with the help of a friend with a legal background and then I submitted it to the secretary of state. When they were approved after certifying that all the requirements were met, I was able to begin my business. Since I'm registered as the sole shareholder, I did not need to hold a shareholders’ meeting to discuss or vote for the director. This simplified my registration process and ensured that my assets are safe. The only disadvantage comes from the double taxation that I incur when declaring my profits, though it is a small price to pay compared to the alternatives (Alstadsæter et al., 2017).
References
Alstadsæter, A., Jacob, M., " Michaely, R. (2017). Do dividend taxes affect corporate investment?. Journal of Public Economics , 151 , 74-83.
Alstadsæter, A., Kopczuk, W., " Telle, K. (2014). Are Closely Held Firms Tax Shelters?. Tax Policy and the Economy , 28 (1), 1-32.
Ashkenas, R., Ulrich, D., Jick, T., " Kerr, S. (2015). The boundaryless organization: Breaking the chains of organizational structure . John Wiley " Sons.
Carney, M., Van Essen, M., Gedajlovic, E. R., " Heugens, P. P. (2015). What do we know about private family firms? A meta‐analytical review. Entrepreneurship Theory and Practice , 39 (3), 513-544.
Cheney, G., Santa Cruz, I., Peredo, A. M., " Nazareno, E. (2014). Worker cooperatives as an organizational alternative: Challenges, achievements and promise in business governance and ownership. Organization , 21 (5), 591-603.
Julius Giarmarco, J. D. (2017). The three levels of family business succession planning.
Kinicki, A., Williams, B. K., Scott-Ladd, B., " Perry, M. (2014). Management: A practical introduction . McGraw-Hill Education Australia.
Wheelen, T. L., Hunger, J. D., Hoffman, A. N., " Bamford, C. E. (2017). Strategic management and business policy . pearson.
