Question

1. Choose the type of business entity for the new restaurant.

Emmitt and John decide to form a new entity for this new restaurant.

Instructions:

1. Choose the type of business entity for the new restaurant.
2. Choose the state of incorporation for the new restaurant.
3. Prepare the appropriate state documents (for example, articles of incorporation for a corporation).
4. Post the state documents and internal governing document to the discussion board, Business Entity Project, by the due date and time (please see Canvas). In posting these documents, you will have the opportunity to take a look at the work of your fellow classmates. Please feel free to post positive comments about your classmates work but this i

Answer 1

The best suited entity for meeting the situation would be a limited liability partnership with a well-defined partnership agreement specifically suited to the situation. Until and unless limited liability partnership is supported by an agreement any conflict results the default rules becoming applicable under regulation 7 and 8 of the limited liability partnership regulations 2001. Limited liability partnership will provide the required protection to every member from misconduct or negligence of another partner considering the financial and emotional upheaval that some of the partners are involved in, it becomes mandatory to protect individual interest while benefiting from pooling of resources. Partnership is essentially a collaboration among individuals which facilitates working together towards a common purpose achievement of combined objectives which are mutually beneficial. It facilitates easier and faster achievement of goals due to shared resources negating investment and resource constraints. The entire Management process becomes much more efficient due to involvement of multiple individuals with distinct talents and skill sets providing better expertise. All these advantages can be negated buy a single disadvantage of certain bad decision a wrongful actions of one individual resulting in crisis in disaster for all the partners involved. Limited liability partnership offers the advantage of creating a separate legal entity from the members, along with the benefit of the personal liability of the partners being restricted to the extent of the investment and interest within the entity andalouse for Organisational flexibility of a partnership along with taxation as a partnership. Limited liability partnership provides the opportunity to adopt the positive elements of a limited liability corporation and partnership providing greater flexibility and benefits. Limited liability partnership does not have extensive statutory requirements which can be time consuming and a major hindrance for small businesses operating with minimal management and staff.

Limited liability partnership as the obligation of maintaining accounts as specified within the Act, will audit requirements and disclosure requirements as specified. Limited liability partnership organisation may be required to provide personal guarantees from members for availing loan or other benefits. In such cases the agreement needs to clearly provide indemnity to the members providing such guarantee state that such liability will be shared equally among all members. Clear definition for provisions regarding insolvency clawback which is the special feature of limited liability partnership in case they become insolvent should be provided within the agreement. This allows for clawback or retrieval of any withdrawals from the partnership including drawings, loan repayments and property distribution from any member of an LLP for a period of up to 2 years prior to an LLP becoming insolvent. However, the court is provided discretion in this regard to verify whether the action was meant to defraud or mislead. Similarly, each member may be responsible to the degree of involvement and control in the business deciding the liability in case of wrongful or fraudulent trading been identified of the business continuing after the members became aware of pending insolvency.

An LLP agreement should clearly list all matters related to sharing of profits and losses comma drawings, ownership of property, meetings in decision making process and control admission of new members, retirement expiration of members, indemnities and insurance, restrictive Queens and in this case continuation and inheritance of the interest in the partnership. the members are responsible for signing the LLP annual accounts and delivering them to the companies House along with the annual return and notifying the companies house of any changes to the constitution of the LLP including name registered office address and be prepared to represent the LLP in case of winding up or dissolution.

A limited liability partnership has the option to issue debentures and provide fixed and floating charges oval faces in a similar manner to a company.

I would require information upon the manner of sharing of duties and responsibilities and profits and losses along with management control and decision making powers and procedures.

Default rules become applicable in the absence of a written agreement.

b The default rules for sharing under regulation 7 and 8 of the limited liability partnership regulations 2001 are:

All members of a limited liability partnership are entitled to equal shares in the capital and profits as specified under regulation 7(1).q

Every member has the right to take part in the management and be involved in the decision making within a limited liability partnership under regulation 7(3).

The expulsion of a member can only be through Express agreement between the members in conference under regulation 8.

The default rules are inappropriate for the partnership if the resources that each partner is investing, both tangible and intangible, differ vastly resulting in great variation and investment by different partners which can finally result in dissatisfaction due to inadequate returns and a feeling of unfairness which may finally jeopardize the partnership. The management decisions need to be allocated weights on the basis of investments made by individuals as the risk exposure of an individual with higher investment is much more than the other, and a decision which exposes the company to high risk therefore has larger impact on such individual. It is only fair that weight be provided to decision making power on the basis of investment.

The management of the partnership will be through a unanimous vote or the vote of the majority, with senior or experienced partner with managerial expertise having the advantage of a single vote having double the weight due to the vast experience and expertise they hold, and in consideration of the larger risk exposure they face.

The default rules regarding the compensation of partners are as above, providing equal share to every partner. This rule cannot be applied if the variation in investment is large and such a rule would lead to a major disadvantage and unfairness being caused to different partners. Therefore, the compensation needs to be decided on basis of capital investment, management experience, working hours and all other investments made by the partners.

The net profits and losses of the partnership for accounting and tax purposes should be distributed among all partners in the ratio of initial capital introduced and revenue generated for the period under consideration. Subject to changes upon introduction of fresh capital to provide adequate representation to the introduced amounts, and maintaining similar balance in future distributions.