Getting a New Business off the Ground Essay Example | Topics and Well Written Essays - 500 words

Getting a New Business off the Ground - Essay Example Additionally, since there is a potential for product liability for Joan in the aviation parts industry, Joan is legally responsible for any damages her defective products may cause. As a sole proprietorship, she absorbs these responsibilities personally, which could pose a large problem should a case arise where she is blamed for her product’s malfunction. For tax purposes, the tax rate imposed on Joan’s business is determined by the personal income tax rate of the owner. So, the sole proprietor of a business does not pay taxes apart from, or separate from, the owner. As such, this tax benefit forms one advantage of operating the business as a sole proprietor (Mauro, 2004). 2. To protect her client from liabilities incurred by the business, Joan’s attorney might recommend a limited liability company (or LLC). The LLC model shields Joan from any blame incurred by the business. So, if some product she manufactures malfunctions on a plane, she cannot be held personally responsible for those who suffer from the malfunction; in that case, it is just the company that is financially and legally responsible for the error. Her attorney may also suggest a corporation, which is a legal entity with its own liabilities and privileges separate from those of its members. A corporation may make more sense than a limited liability company if Joan hopes to expand her business to a larger scale, and if she can persuade investors to help grow her base of business. Like a LLC, a corporation shields Joan from the company’s liabilities and debts (Moye, 2004). 3. Her attorney may suggest liability insurance, which is an insurance system that can protect Joan from the risks of liabilities imposed by lawsuits. If Joan’s company were to be accused of negligence or error in manufacturing its aviation parts and brought to court in a civil suit, Joan’s liability insurance would