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Legal Aspects of a Small Business

I. Available options for the organizational form of the operating entity (identify and compare area organizational characteristics and features):

A. Sole proprietorship

B. Corporation

  • 1. Public vs. closed corporation
  • 2. “S” corporation vs. “C” corporation
  • 3. Professional corporation

C. Partnership; general vs. limited partnership

D. Limited Liability Company

II. Factors influencing the choice of organizational form:

A. Financing the organization and growth of the business

  • 1. Financial planning/forecasting/budgeting
  • 2. Debt vs. equity
  • 3. Sale of securities; federal and state regulation

B. Liability of the entity, its owners, managers, directors, officers and employees to third parties

C. Income taxes

D. Ease of management (routine issues; resolving conflicts; fiduciary duties; put/call options)

E. Transferability of interests

F. Qualifying to do business in multiple jurisdictions

G. Compensation arrangements and fringe benefits

III. Additional issues to consider:

  • A. Extending credit and collecting delinquent accounts
  • B. Local licenses, permits, fees and taxes
  • C. Federal, state and local reporting requirements
  • D. Documenting company actions and decisions
  • E. Intellectual property
  • F. Insurance coverage
  • G. Conflicts of interest of entity owners, managers and employees
  • H. Franchising
  • I. Magnuson&emdash;Moss Warranty Act
  • J. OSHA
  • K. Federal and State employment laws

IV. Buying and selling the small business:

  • A. Identifying assets and liabilities
  • B. Allocating the purchase price
  • C. Setting the price and terms (put/call options)