The Fifth Amendment and Its Protection
The fifth amendment in the US Constitution concerns the protection of people from self-inflict. Although businesses are commonly considered entities, this amendment does not apply. The persons in the company are, however, shielded from self-incrimination by amendment. In the other hand, this provision completely covers the sole proprietorships. In a supreme court case against Doe, for example, in 1984, the court ruled that obliging Doe, during testimony, to produce business records violated Doe's right of self-inculpation because it required Doe to bear witness against himself. In such a ruling, therefore, it was clear that sole-proprietorships are protected by this amendment as one cannot separate them from their owners (Sullivan, 1987).
Corporations and the Fifth Amendment
Corporations, on the other hand, are not directly protected by this amendment. Although individuals within the corporations are protected against self-incrimination, they can be compelled to testify against the corporations. Although the corporations can be punished for crimes committed, in essence, it is the individuals within these organizations that commit these crimes. Therefore, protecting the individuals against self-incrimination ends up protecting the corporation. Notably, the individuals are not protected by the fifth amendment when it comes to questions against the corporation. Although a corporation can be accused of a crime, in the case where all the individuals within this organization are protected against self-incrimination, the entire corporation succeeds in protecting itself against self-incrimination (Thompson, n.d.)
The Impact of the Fifth Amendment on Businesses
Amidst many discussions, this amendment not only protects individuals but have also succeeded in protecting businesses against self-incrimination. Starting a business, especially sole-proprietorship guarantees full protection against self-incrimination. On the other hand, individuals starting corporations are also protected, and eventually, the entire corporation is also protected.
Discussion Two
Limited Liability Companies (LLCs) Over Corporations
Limited Liability Companies(LLCs) are businesses that operate just like partnerships but enjoy the benefits of corporations. Some of the benefits include limited liability and exemption from double taxation. They become very popular in situations where they are treated as partnerships for the sake of taxations. More to that, LLCs also enjoy centralized management and also enjoy continuity when classified as a corporation. With LLCs, manager can transfer their trust to another family member even within other generations. As opposed to other larger corporations, these are flexible to run and manage as annual meeting are not mandatory (Scotto & Matthews, 2017).
Comparing LLCs to C Corporations
Comparing the LLCs to C corporations, the former enjoys more benefits than the latter. To begin with, they are not subjected to double taxation which is common to C corporations. In double taxation, the corporation is taxed at a corporate level on all its earnings. Additionally, the shareholders are also taxed on their benefits on an individual level. Thereby, these corporations end up being taxed twice, at the corporate level and the individual level. With LLCs since they are treated as partnerships, they are only taxed once, at the individual level. However, the two are similar in such that the both enjoy limited liability. In limited liability, the organizations are treated as separate entities from the individuals who form it.
LLCs vs. S Corporations
Compared to the LLCs, the S corporations also enjoy limited liability as well as exemption from double taxation. However, the S corporation has a restriction on the number of a shareholder that it can have. Moreover, the shareholders of an S corporation are excluded from pension plans as well as nonresident aliens. Above all, the S corporations cannot become a part of an affiliated group. Notably, an S corporation cannot enjoy having different classes of members. As a result of all these limitations, an LLC enjoys more flexibility compared to an S corporation (Scotto & Matthews, 2017).
Why Choose LLCs as a Business Structure
When making a decision to start up a business, an LLC would be a better alternative. It is more flexible to operate. The major benefit on an LLC is exemption from double-taxation. Unlike the limited partnership, an LLC is also not required to have any general member who is not protected by limited liability.
References
J. Scotto, D., & Matthews, S. (2017). 11. Limited Liability Company: The Growing Entity of Choice - Fairleigh Dickinson University (FDU). Silberman College. Retrieved, from http://view2.fdu.edu/academics/silberman-college/centers-and-institutes/rothman-institute-of-entrepreneurship/outreach-programs/family-business-forum/family-ink-articles/11-limited-liability-company/
Thompson, V. Can a Corporation Exert Fifth Amendment Rights? Yourbusiness.azcentral.com. Retrieved, from http://yourbusiness.azcentral.com/can-corporation-exert-fifth-amendment-rights-24778.html
Sullivan, S. (1987). Fifth Amendment Protection and the Production of Corporate Documents. University of Pennsylvania Law Review, 135(3), 747. http://dx.doi.org/10.2307/3312080
