Type of paper: Essay

Topic: Business, Liability, Tort Law, Company, Partnership, Entrepreneurship, Commerce, Corporation

Pages: 3

Words: 825

Published: 2020/10/07

Based on the research I conducted, it would be advisable to first concentrate on the pros and cons of each type. There are many different business formations that Gloria Smithson can engage into to. The formations include; partnership, limited liability company and corporations. In partnerships, the members should be between a minimum of two and a maximum of twenty members for it to be valid (Eisler, R. 2003). When they join a partnership, there will be limited liabilities in such a way that the members are obligated to share the liabilities hence easing the burden of carrying the whole burden.
In partnerships, the pros include; sharing of profits and losses. This reduces the amount one has to pay in settlement of any expense. The members are able to distribute the liability among all the members. It is also easy to form a partnership since there are little formalities involved. The legal obligations required to be met by the government are minimal compared to other formations like companies. The last advantage is availability of manpower hence saving a lot of time and there is no overworking (Eisler, R. 2003). The duties are evenly distributed thus increased production leading to increased profits.
The members are obligated to contribute to the well-being of the partnership thus it becomes easy when it comes to making diverse and solid decisions. It becomes easy for the members to contribute the initial capital making it easy for them to start the partnership. However, before forming a partnership, it is essential to sign a contract where all the members are in agreement of the terms and the conditions stipulated in writing since the contracts help in solving disputes that could arise in the future when presented in a court of law.
The cons include; delayed decision making. When many members are involved in decision making, there are bound to disagree on some issues and sometimes cause conflict and enmity between the parties involved. Such disagreements lead to the partnership lagging behind. The conflicts do not also provide an ample environment for thriving of any business. In case of a general partnership, one member could be liable for the act of another member hence not suitable for someone who wants to insulate the family against liability. The last con is non-control over the business. No one is allowed to make any decision without the consent of the others hence it becomes dependent on the other members.
A limited liability company is well depicted by the name itself. It simply means that the liability is limited among the members. Such a business aims at protecting the individuals from incurring all the expenses. In this business formation, the members are shielded against individual liability arising from the debts and borrowings of the business. When it comes to corporations, it must follow the rules and regulations laid by the government of a country. The pros of a limited liability company are; protection of the members form the liabilities of the business hence no auction of personal property (Mancuso, A. 2013). The members also share their losses and profits on the basis on the capital contributions of the members. Therefore, there is no way a member with the least shares receive more dividends than another one whose contribution was higher.
There is a going concern in this type of business where the business is viewed to continue in the foreseeable future. Therefore, in case of death of a partner, it cannot be dissolved since there is a chance of succession of the members. The cons are; the members are not allowed to pay themselves hence it becomes a constraint when one has a burning financial issue as he cannot get the money form the business (Mancuso, A. 2013). There are no frontier benefits earned by the members and lastly the taxation of the profits earned by the members without the consideration of whether they have received their dividends or not.
The corporation is regarded as a single entity by law, therefore, it can be sued or it can sue another party but as a single entity. Being recognized a single entity, the liability is, therefore, limited hence it cannot be extended to the members (Emanuel, S. 2009). In case of debt settlement, the corporation assets are the ones placed as security for the liability incurred.
The pros are; limited liability to the members since the corporation is regarded as a single entity hence protection of liability from the family. It is also easy to transfer ownership hence very flexible and it also guarantees continuation and lastly, they are sovereign in that they are considered as single entities. The cons involved are; it involves lots of formalities hence difficult to form. They are also dependent on the state due to the guidelines hence the need to meet all the requirements demanded of them (Emanuel, S. 2009). A lot of expenses are incurred in tax. The corporations forward their returns to the relevant authorities and at the same time, the members are also individually taxed.


I would therefore, recommend the limited liability companies since there are minimal expenses; it is easy to form it and lastly the objective to shield the family from personal liability.




Eisler, R. T. (2003). The power of partnership: Seven relationships that will change your life.
Novato, Calif: New World Library.
Mancuso, A. (2013). Your limited liability company: An operating manual.
Emanuel, S. (2009). Corporations. Austin: Wolters Kluwer Law & Business.

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WePapers. (2020, October, 07) Example Of Essay On Gloria Smithson. Retrieved May 29, 2023, from https://www.wepapers.com/samples/example-of-essay-on-gloria-smithson/
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Example Of Essay On Gloria Smithson. Free Essay Examples - WePapers.com. https://www.wepapers.com/samples/example-of-essay-on-gloria-smithson/. Published Oct 07, 2020. Accessed May 29, 2023.

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