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Introduction
This paper will address the basic elements of business formation. It will evaluate both legal and regulatory aspects which, may be considered during the creation and modification of the business. Additionally, it will provide an analysis of how professionals may be selected to provide business advice including their would-be qualifications. Here, the researcher will look at the role of expatriates. Finally, the study will suggest the best choice of legal entity that may be selected and the reasons behind such a move. The above analysis will be used to address a case study involving Harry and Sons.
Legal and Regulatory Issues
This section will address legal and regulatory issues that may be considered in creating/modifying a business.
The main legal issues to be considered during the creation or modification of a business are as follows:
- Agreement process and ownership
- External compliance or government policy and regulations
Therefore, it would be important to look at the contractual relationship if the business involves two or more parties. Here, the basic issues to take into account are that all parties should be involved in a valid contract. In other words, the creation or modification of any business must ascertain that any kind of agreement involved is backed up by a real contract. In the same vein, the contractual agreement must incorporate all legally binding aspects (Beale 23; Halson 19). For instance, there must be an offer that refers to the intention to agree on certain terms; acceptance refers to the agreement of the terms specified in the offer. Moreover, a valid contract must have consideration since each party must get something of value (Young 31). Lastly, parties involved in the creation or formation of a business should have intentions to seek legal relations.
The above-mentioned aspects are critical during the creation of a business especially if it involves an agreement between two or more parties. It is more applicable in cases of partnership agreements. The other consideration is that the parties should ensure that their partnership deed outlines the rights and responsibilities of all the parties. This may require them to ensure that it complies with other relevant legislation such as Partnership Act 1980 among others.
Choice of Professionals
In choosing professionals outside the business, it is important to ascertain that they have all qualifications needed to address the problem. Therefore, the use of expatriates to provide professional advice should not go outside the requirements the company would choose if it sought to seek the same at the local level. In this case, the selection criteria for professionals to offer guidance on how to operate a business may be anchored on the following aspects:
- Qualifications: This means that they should possess all expertise to undertake or offer any consulting services. The management should see to it that it hires people who have a good reputation and whose profiles support their candidature on the same
- Availability: The other requirement is that the professionals should be available to undertake such a duty. This is because the management will need people who can be reliable in the entire process. In so doing it would save time and have minimal instances where its resources may get wasted as a result of delayed consultancy services. This requirement also underscores the possibility of the professionals to commute from their homeland to the premises of the business especially if it involves the need for technical input.
- Financial Implication: Last but not least, management should ascertain that the choice of professional consultants from abroad does not create unprecedented costs for the business. In other words, the choice should be value-adding both financially and in terms of personnel. Indeed, the need to have international professionals may be inevitable if such involves replacing a deficiency with the local personnel. However, the company should not direct all its finances to such since it is an expense.
Legal Entity Choice
This section will look at the legal entity choice one would make in the creation or modification of a business. The main choice would be that of partnership.
Analysis of Business Situation No.2
After Harry passed away Dick and Jane, run the business as a general partnership. This includes contracting with companies such as ExxonMobil and BP-Amoco. It is also the case that each of the two had 25% ownership of the business while 50% belonged to Wilma and Betty. The business originally operated as a sole proprietorship but Harry had brought Fred and Barney into the business without a formal partnership agreement. The main issue is that Dick and Jane intended to expand the business and at the same time sell it to a consolidator. As such a consolidator is a company that purchases local businesses in exchange for a combination of stock, cash, and debt.
Now, looking at the issues above it can be seen that Dick and Jane are making decisions that may create conflicts among the stakeholders, for instance, Wilma and Betty as well as Fred and Barney. This is because by their right they can claim for an explanation why the two chose to sell the business to a consolidator without involving them. Normally, a partnership requires that decisions be made by all the partners contrary to a sole proprietorship. However, looking at the scenario above it is not clear if the business left behind by Harry was a partnership or sole proprietorship. Well, it has been established that it was originally the latter case but looking at beneficiaries involved one will regard it as a partnership. This is because there are many stakeholders involved with the shares of the business. All the same, since there was no legal indication that it was a partnership business then it may be assumed that it was passed on to other generations in such status quo. What Dick and Jane ought to do is convert the original status of the business to being a partnership and indicate the rights of every member. Thus, assuming that they would be the active partners and the rest being dormant partners then they can proceed to sell the business to a consolidator without fear of legal conflicts from other beneficiaries.
Works Cited
Beale, Hughes. Contract Law. Hart Publishers, 2002. Print.
Halson, Roger. Contract Law. Longman Publisher, 2001. Print.
Young, Max. Contract Law: The Basics. Taylor & Francis Publishers, 2010. Print.
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