business law legal underpinnings

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A company is an enterprise engaged in economic, manufacturing or technical operations. A foundation is something that acts as a base for funding. Legal principles of business law applicable to the different types of law which regulate the different systems of business. The various business arrangements include Sole Proprietorship, General Partnership, Limited Partnership (LP), Incorporated Company (Inc), and Limited Liability Company (LLC).
In order for a company to provide services to a customer, it enters into a deal with the client. This contract sets out the terms and delivery of the service and specifies the service to be offered. Both client and the business offering the service have obligations to fulfill to facilitate the contract. Failure by either party to fulfill its obligations is referred to as a breach. A breach therefore is a result of either party not performing according to the terms of the agreement or not performing at all. For the different structures of Tinker’s Home Security Service and Tinker & Tailor’s Home Security Services to be sued for breach of contract, it means that the companies have either not delivered according to the terms of the contracts or failed to deliver at all.

When my company is sued for a breach of contract, I would make all attempts possible to try and resolve the problem out of court or have the dispute resolved informally. However, if this fails and law suits arise, responses to the suits by the five companies are all different because they are all governed by different laws. In general, there are three remedies given out by Courts of Law for breach of contract which are Damages, Specific Performance and Cancellation and Restitution.

A Sole Proprietorship is a structure of business that is owned and run by one individual and there is no legal distinction between the business owner and the business. The business owner bears all liabilities directly and enjoys all profits. When Tinker’s Security Home Service (Sole Proprietorship) is sued for breach of contract, as the Proprietor, I am sued for breach of contract since there is no legal distinction between the company and the proprietor. As the Proprietor, I thus have unlimited personal liability whereby the creditors and clients who have sued Tinker’s Home Security Business for breach of contract can access both my personal and business assets. I could also be held responsible for vicarious liability whereby I am held liable for my employees’ actions, when these actions cause harm to the complainant. Being a sole proprietorship, the burden of liability is heaviest on me as the proprietor and can even lead to bankruptcy where damages awarded to complainant are of more value than my business and personal assets combined. However, I can reduce the risks of my personal liability exposure by ensuring that there is clarity in the contract that I am entering into. All expectations should be spelled out in a simple language and I would seek clarification in case of any doubts. I would also take out insurance against any probable risks.

A Partnership is a business structure formed when two or more people come together to form an enterprise for purposes of generating profits. Partners in General Partnership may own equal or greater shares in the company. All partners in the General Partnership participate in operations of the business, divide management responsibilities and share profits equally. All partners in General Partnership are personally liable for all the obligations of the Partnership. Liabilities are thus shared by all members in a General Partnership. As a Partner in Tinker & Tailor’s Home Security Service which is a General Partnership, just like all the other owners of the business, I am open to personal unlimited liability for debts, losses and liabilities of the business. I am also subject to bear responsibility for actions of my other partners. When our General Partnership business is sued for breach contract and damages awarded to the complainant, creditors can go for my personal assets as well as personal assets of my partners. In order to reduce my personal liability as an owner in case of a lawsuit, I would ensure that the job is done as stipulated in the contract within the given time frame and budget. It would also be prudent to insure the Partnership against any foreseeable risks.

Limited Partnership has two categories of Partners; General Partners and Limited Partners. General Partners are the people who manage the business and are personally liable for debts of the business while Limited Partners contribute capital to the business but do not participate in managing the business. Unlike general partners in this Partnership, limited partners do not incur liability for the Partnership debts above their capital contribution. Profits are shared by both limited and general partners in this arrangement. As an owner in Tinker & Tailor’s Home Security Service (LP), when I am a General Partner, when the company is sued for breach of contract, I am personally liable for debts of the business and creditors can come for my personal assets to settle claims. However, when I am a Limited Partner, I will only be liable to the extent of the amount of capital I have contributed to the business. Due diligence should be taken in all aspects of conducting the company business to avoid legal suits and at the same time, the business should be insured in case of liabilities. However, should there be legally valid reasons why the contract has been breached; I would ensure that the company engages an experienced attorney who would ensure that our case is well presented to the Court to reduce my personal liability exposure as one of the owners.

An Incorporated Company is a separate entity from the owner of the business and has its own natural rights. Unlike Sole Proprietorship, Partnership and Limited Partnership above where owners of the businesses are the same as the businesses and personally bear liabilities of the businesses, in an Incorporated Business, the owner is protected from liabilities incurred in running the business and borne solely by the business. As the owner of Tinker & Tailor’s Home Security Inc. (Incorporation), when the company is sued for breach of contract and loses the case in a Court of Law, The Corporation, not myself will be responsible for settling compensation to the complainant as opposed to the case of sole proprietorship, partnership and Limited partnership where business owners are personally liable for debts and lawsuits against their businesses. However, it is imperative to ensure that all parameters in the contract are themselves not in breach of the law and are enforceable; this will reduce my personal liability exposure as an owner.

A Limited Liability Company (LLC) is a business structure that incorporates features of both partnerships and corporations. Owners of a Limited Liability Company are called Members and are protected from liability. LLCs are required to offer stocks and Members decide how to share profits. The main difference between a LLC and a Partnership is that a Limited Liability Company separates business assets of the LLC from personal assets of the owners thus protecting the owners from the LCC’s debts and liabilities. As one of the owners of Tinker & Tailor’s Home Security Service, LLC, when the company is sued for a breach of contract and loses in the lawsuit, the company will be held directly liable and my personal assets are insulated from any debts or liabilities of the company. However, as one of the owners of the business, I would ensure due diligence is conducted in the operations of the business to avoid all forms of law suits. One of the ways is to do a research on any client our company is getting into a contract with to ensure that they are honest about their history to avoid any surprises.

The business that I will own is a sole Proprietorship because it is simple to start and does not require any formal action to start. However, I will obtain a business name and the necessary Business Licenses and Permits to run the business. It will be a service Industry in Education sector. I plan to start a School for pre-schoolers. Since I will be the sole owner of the business, I will make all decisions for the business, take all profits and bear all liabilities since the business will not be a different entity. In regard to tax returns, I will be able to fulfill the required tax reporting requirements easily because the business will not be taxed separately from me. The main challenge of the business will be Unlimited Personal Liability because there will be no legal separation between me and the business. I intend to reduce my personal liability exposure by ensuring that best practices are applied in all sectors of the business. For starters, I will ensure that I have all the necessary Business Permits and Licenses, have required facilities and professional personnel. Since the school will be handling children, I will ensure that I do a thorough background check on my staff to ascertain that they are of the right caliber to handle children. I will also ensure that I insure the school against any probable risks.

In conclusion, all structures of business have their own advantages and disadvantages. Therefore, whichever structure of business one is engaged in, it will succeed as long as best practices and due diligence is employed in all the operations of the business.


Bubb, R. (2014). Choosing the Partnership: English Business Organization Law During the Industrial Revolution. Seattle UL Rev., 38, 337.

Chaudhry, P. E. (2014). Confronting the gray market problem. Business Economics, 49(4),


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Sargent, M., & Schwidetzky, W. D. (2014). Limited Liability Company Handbook, 2014-2015 Edition. Thomson Reuters.

Zamir, E., & Teichman, D. (Eds.). (2014). The Oxford handbook of behavioral economics and the law. Oxford University Press, USA.

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