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Sample 1:

Organizational forms are extremely important because they determine the managerial and financial dynamic of an organization or company. Choosing the right organizational form affects the business’ legal, operational, and financial aspects. A graphic designer at Pathways is going to start his own design company on his own. According to Bagley, “the  preferred  form  of  ownership  for  real  property today is the limited liability company, or LLC.” (Bagley, C. E., 2019) 

LLC is the organizational form the designer should choose for his venture because legally an LLC limits personal liability because it is separate from its owners. Financially, if the graphic designer is in debt or loses money, his personal assets cannot be used to pay his business debt. Personal assets are protected even if an employee decides to sue for negligence. Even the operational implications of an LLC are less taxing. For example, an LLC does not have to hold annual meetings, and are usually not required to keep extensive records, unlike other corporations. (Haskins, J., 2020) Based on this information, I believe LLC is the employee's best option. 

References

 

Haskins, J. (2020, March 5). Advantages of an LLC. Retrieved from  https://www.legalzoom.com/articles/advantages-of-an-llc

Bagley, C. E. (2019). Managers and the Legal Environment: Strategies for the 21st century (9th ed.). Cengage Learning

Sample2:Top of Form

The graphic designer that left Pathways to start up his own company has many organizational forms to choose from. The graphic designer should choose to structure his company as a Limited Liability Company (LLC). In doing so, the entrepreneur “combines the tax advantages of a pass-through entity with the limited liability advantages of a corporation” (Bagley, 2019, p.579). The graphic designer is already promised work from Pathways, whose relationship remained positive though he decided to leave. Bagley highlights that “An LLC offers the advantages of both the limited partnership and the S corporation without their respective drawbacks” (Bagley, 2019, p.579). LLC’s are better than S-corporations in this situation because LLC’s have less “restrictions on shareholders and the ability to have more than one class of securities” (Bagley, 2019, p.579).  Pathways is structured as an S-corporation which requires companies to “have one class of stock” (Case Study, 2011). An LLC is better than a sole proprietorship in that it takes most of the liability away from a graphic designer, who under a sole proprietorship would be personally liable for all of the companies' “debts, contract obligations, and tort liabilities” (Bagley, 2019, p.576).

In order for a graphic designer to reap the full benefits of the LLC, it is imperative that the operating agreement is “tailored to the individual company and the needs of its members” (Bagley, 2019, p.579). Like Pathways S-corporation, LLC’s do not pay income taxes itself. One key benefit of the LLC is “Unless a business is organized as a corporation under state law or is publicly held, the IRS’s “check the box” regulations permit the founders to decide whether the entity is to be taxed as a corporation or a pass-through entity. State-law corporations and publicly traded entities are always taxed as corporations. Accordingly, LLCs are not taxed at the firm level unless they elect to be taxed as corporations” (Bagley, 2019, p.580). This is beneficial in that it gives the graphic designer the flexibility of choosing its method of taxation for the company.

 

References

Bagley, C. E. (2019). Managers and the Legal Environment: Strategies for the 21st century (9th ed.). Cengage Learning.

2011, Organizational Forms and Law. Miami International University of Arts and Design, Law Policy & Ethics in Design and Media Arts.

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