5.3 Discussion: Business Forms and Liability

Getting Started

There are distinct advantages and disadvantages associated with the various business entity forms. For example, a business owner may need partners who possess the capital or business expertise needed to help the business prosper. Alternatively, a business owner whose main goal is to further shield himself/herself from personal liability would want to explore business forms in which the debt or liability is incurred by the business and not its owner.

Upon successful completion of the course material, you will be able to:

  • Explain the advantages and disadvantages of operating various forms of business.
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Resources

  • Webpage: Forms of Business Organization
  • Webpage: Menendez v. O'NIELL, 986 So. 2d 255 (La. Ct. App. 2008)
  • Webpage: The Five Most Common Ways to Pierce the Corporate Veil and Impose Personal Liability for Corporate Debts
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Background Information

Numerous factors should be considered when selecting a particular type of business formation. Below are some routine questions that should be contemplated:

  • Is it easy to set up the business form or is the process complex?
  • What level of liability will be borne by individual owners?
  • What tax consequences will arise at both the entity level and owner level?
  • What is the management structure of the business form? What are the rights and obligations of the party or parties involved?
  • What financing options are available? For example, can the business entity issue common stock?
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Instructions

  1. Review the rubric to make sure you understand the criteria for earning your grade.
  2. Read the following:
    1. Forms of Business Organization
    1. Menendez v. O'NIELL, 986 So. 2d 255 (La. Ct. App. 2008)
    1. The Five Most Common Ways to Pierce the Corporate Veil and Impose Personal Liability for Corporate Debts
  3. Navigate to the threaded discussion, and respond the following: 
    Summarize the facts, issue, and holding of the Menendez v. O’Neil (2008) case.
    1. In what instances might a court disregard the corporate entity and hold an individual shareholder liable?
    1. Based on your readings this week, recommend two other types of business forms that would provide protection from personal liability. Explain the basis for your recommendations.
    1. If you were the sole shareholder of a corporation and a plaintiff sued your corporation, do you believe you would have an ethical obligation to provide personal assets in satisfaction of the plaintiff’s demands if the assets of the corporation were insufficient?
  4. Your initial post is due by the end of the fourth day of the workshop.
  5. Read and respond to at least two of your classmates’ postings, as well as all instructor follow-up questions directed to you, by the end of the workshop.
  6. Your postings also should:
    1. Be well developed by providing clear answers with evidence of critical thinking.
    1. Add greater depth to the discussion by introducing new ideas.
    1. Provide clarification to classmates’ questions and insight into the discussion.
    1. Be posted on three different days during the workshop.