The Risk of Losing It All
In the times, when some businesses may get even sued by someone that was just careless using a provided product, companies have to protect themselves against possible lawsuits. The lawsuit against McDonald’s for offering a coffee that was too hot and caused burns of the woman that spilled it are not very common (Bertram, 2013). However, the lawsuits for the breach of the contract are definitely more popular; a simple Google search brings up 1.5 million results, including news, articles and court cases. Any business that is starting up or one that has already been firmly established in the market, either a small family-owned business or a large corporation is at ...view middle of the document...
Even though one might think that partnership will help reduce personal liability during a lawsuit, nevertheless this may not be the case. In some cases, the amount demanded by the plaintiff may so high, that even though it gets divided among all the partners, it can still cause all of them to file for bankruptcy.
Tinker & Tailor’s Home Security Service (LP) The exposure of the personal assets varies depending on how much money each limited partner has put in. In other words, the limited partners are liable for the debts only up the limit of their investment (Seaquist, 2012).
Tinker & Tailor’s Home Security Service, Inc. (corporation) The risk of exposing personal assets in the corporations are low, given that all the formalities associated with the corporation are being followed. If the company is “not playing by the rules”, the owners of the corporations are subject to unlimited personal liability (Seaquist, 2012)
Tinker & Tailor’s Home Security Service, LLC (LLC) The exposure risk is similar to the one in the corporation and is limited to the amount of the money invested by the individual (Johnson, C. , n.d.). However, this kind of organizational structure is more common with professionals like doctors or lawyers (Seaquist, 2012).
Source: Seaquist, G. (2012). Business law for managers. San Diego, CA: Bridgepoint Education, Inc.
Living an American dream and starting a business from the scratch is a goal of any entrepreneur. However, those dreams can be easily shattered by poor planning and low capital investment. Desperate attempts to revive a failing business and borrowing money can only make things worse. This result of these decisions can be especially painful with a sole proprietorship and even for the partnerships, both general and limited. I believe that the owners of these organizations have two options: first, they should...