Abstract
Everyone’s drive to achieve economic success depends heavily on businesses. Every wealthy individual around the globe relies on businesses for personal wealth acquisition. Therefore such have made it necessary for people who want to succeed in business to possess a solid understanding of the various business forms in the world. Entrepreneurship presents Christians with a variety of obstacles that put their morality and Christian ideals to the experiment. People may notice things instantly in the civilized era. Thus, the future Christian corporate strategy may only sometimes reflect the people’s Christian corporate ethical and moral standards. While numerous company entrepreneurs aim to run respective companies according to moral codes, the majority would probably accept that preserving Christian beliefs might be damaging to these businesses. Therefore based on the case of Devon, Carl, Bill, and Alex, this paper will provide a deeper analysis of the various business forms, recommend an ideal form and provide a Christianity perspective regarding the business forms.
Recommended Form Of Business Organization
Currently, Xavier is running the Joint Stock Company as a sole proprietorship. However, a different form of business, like a corporation or a limited liability company, would be better than a sole proprietorship. Therefore Joint Stock Company should take the form of a limited liability company since, through such a form since all the interested parties will benefit. Being that Devon, Carl, Bill, and Alex are interested in the evasion of personal liability relating to this business through payment of taxes, then this is the best form of business that these individuals should take. Thus they will be able to retain the business in the family while still running it successfully and also the farm will be in safe hands.
Limited Liability Company
A limited liability company is among eh best forms of business to pick, especially in cases whereby the business owners do not want the liabilities of the company to affect them. Such is because the liability of the company only touches the members of such companies’ contributions. Credentialed professionals, including physicians and attorneys, frequently adopt limited liability companies (Mancuso, 2019). Likewise, the assets of the owners of the business and those of the company are separate (Beaudrot Jr & Houghton, 1993). When the company undergoes difficulty to the extent whereby the company owes the creditors, the owners of the company are safe since these creditors will only make claims from the company.
Similarly, setting up a limited liability company is often very easy and, therefore, will be a better option for these individuals since it will be manageable. The authorities are subsequently notified and provided with written incorporation documents to fill these documents. The limited liability company’s members’ entitlements, responsibilities, and all other obligations are outlined in these articles. The paperwork also includes information such as the statement of purpose for the firm, the information regarding the identity of the registrant, and the identities and residences of the owners of the company. The state then receives the fee and this documentation, and for the owners to get an employer number, they need to do extra documentation, and payments should always be filed.
The limited liability company is also secure in the absence of the actual owner since the owner can appoint a trusted person to conduct the operations of the company, and such might go on even if the owner of the company dies. The people the owners appoint to engage in the company’s management are thus referred to as the directors. When the owners decide to have such control, they can return it from the appointed directors. In addition to lacking legal constraints, limited liability companies are in addition harder to obtain additional financing than corporations due to their greater reputation, and profit preservation is dependent on the firm’s growth strategy. Limited liability companies blend their members’ limited liability with solid legal freedom regarding the company administration and members’ relations (Gomtsian, 2015). The good characteristics found in corporations and partnerships are found in Limited Liability Companies, which are not incorporated. Limited liability companies were designed to give benefits of flow through a tax which is present in partnerships (Bosko, 1993). Therefore these owners will be saved by such a form of business from paying taxes since this form of business does not have double taxable in that these owners only have to provide personal taxation from their attained profits instead of also filing returns on a business and personal level. Limited liability companies work following the law and meet tax obligations following the rules (Fernando, 2022). These individuals who will now be the owners of this business will also enjoy flexibility in the management of this firm when they regard the business as a limited liability company. Also, a Limited Liability Company lacks double taxation, which will be beneficial to the owners, i.e., Devon, Carl, Bill, and Alex.
Advantages Of Limited Liability Companies
A limited liability company is better placed since it gains flexibility from the fact that it has a wide range of taxation to select and use, which can belong to other forms of business like partnerships and corporations or sole proprietorships. Through such, the company has an advantage since the government can perceive the company’s income as those of the owners of the company, which therefore provides the company’s owners with the obstacle of double taxation.
Additionally, a limited liability company has provisions that provide its owners with proper protection. Such protection arises from the fact that such companies possess limited liability status, separating the company from its owners since it becomes an independent legal entity. Thus through such, no personal liability arising from the company can reach the owners of the company. Thus the company has to personally handle its liabilities and issues without affecting the financial standing of the owners. Also, the owners of the company have an advantage since they can obtain money from the company through checks during times when the company has enough money, and the profits that the company gets can get distributed among the owners as per the preferences of the owners.
Disadvantages Of Limited Liability Companies
The ownership of a limited liability company is frequently more difficult to change or shift from one owner to another than a corporation’s. The businesses may dispose of stock to expand ownership while barring restrictive shareholder agreements. Thus the shareholders may dispose of shares to other people like third parties. In a limited liability company, changes in the number of members of the company or having more members have to pass through the approval of all the members of the company unless there is a common agreement among the members.
Even though the owners are better placed, the director responsible for the daily company operations suffers to some extent since such an individual receives the company’s profits, which the members regard as income which thus means that the government taxes such money. Therefore such an individual gets less money from the profits since the taxation rates may need to be fairer. Also, sole proprietorship tax has to be paid by such an individual, and such tax does not apply to the owners whom the government assumes are not active in the company (Todd, 2011). The business structure of a Limited Liability Corporation makes it difficult to obtain dependable finance. Comparatively to corporations, banking firms can become reluctant to provide financing to businesses that operate as Limited Liability Companies. Numerous lending agencies can view such a corporation as lacking financial solidity or not being serious as it needs to have professionalism. Placing their cash in these companies might be dangerous for these lending companies.
Partnership
The word Partnership is going through rebirth (Merchant, 2000). A partnership is a business structure in which more than two people operate in equal administration of the company and also share the losses or profits of the company equally. The owners of partnership businesses are subject to unrestricted individual liability for various company decisions. These owners also have contributed their personal financial resources and expertise to the company. They, therefore, have to distribute the company’s losses and profits equally. The responsibility of a limited partner is in the sum of money they put into the company; after those money has been distributed, such a partner holds no other responsibility for anything else related to the company. Another significant member of a partnership company is a general partner who possesses unlimited liability in the company and also is active in the management of the company.
The existence of a partnership is based on the agreement between the owners who can therefore have either verbal or written agreements which indicate the conception of the company. The Partnership Act of 1932 provides safeguards to the agreement between the owners to establish a partnership company. The requirements by the Partnership Act 1932 on whether a partnership company exists is that the owners must have established the company by having a contract. Also, the company has to be existent and engage in legal businesses. Therefore agreements are necessary in partnerships, and thus there is equal distribution of losses and profits among the partners in cases where there is no agreement between these partners. The partners have the right to control and manage the company. Also, the interests are not transferrable, which means that the shares cannot be shifted or given to another person by a partner since such would mean that the person receiving these shares will become a new partner. However, other partners have to approve such actions. The partners should have a partnership deed to initiate a partnership. As per the Partnership Act, these partners can register their partnership if they have such a document. Therefore, the banks and other financing institutions perceive partnerships differently, which therefore makes it easier for these partnerships to get funding and financial assistance from these institutions.
Advantages Of Partnerships
Partnerships can easily get capital as compared to other business forms, and such is true since partnerships may get loans and financial assistance easily from lending institutions like banks. Also, partnerships have more specialization since this type of company is run and managed by many people with varying skills and expertise, who can also result in the better success of the partnership. Moreover, partnerships do not have situations of double taxation where the government first taxes the money of the company before again taxing the partners through individual taxation. Also, the partnership founders who invested capital in launching a company are paid via capital interest, making them eligible for interest. In contrast, quasi-founders provide the solutions that, ideally, would lead to the company’s continued prosperity.
Disadvantages Of Partnerships
Even though a partnership may seem good, it presents various areas for improvement, like the possibility of termination of the partnership when one of the significant partners dies, thus limiting the continuity of a partnership. Also, unlimited personal liability is possessed by the general partners regarding the partnership obligations. Therefore in cases of bankruptcy of the partnership company, the partners can be pursued and approached by the creditors of the company because of the company’s obligations.
Corporations
When the investors get stock, it becomes the initiation of a legal corporation, and therefore, the corporation’s owners become these investors, i.e., shareholders. Corporations can either be public or private, with the initial referring to a government-established corporation that has the government-related responsibility of law administration. On the other hand, when private individuals create a corporation, it becomes a private corporation that is focused on the goals of these individuals. Corporations can also be nonprofit or profit corporations with the initial focus on business activities. However, the profits it achieves may not be shared or distributed to eh shareholders of the company. Profit corporations exist to generate profits.
Advantages Of Corporations
The shareholders of these corporations possess limited liability, and the owners of such companies can give out stock, thus subsequently getting capital for the business.
Disadvantages Of Corporations
There is double taxation of the income made by the corporation, and there are many regulations to be followed by the owners of corporations to maintain or start such corporations.
Christian Worldview
The ideal choice of business form from the viewpoint of Christianity may not be a limited liability company despite the business perspective preferring the limited liability company.it is always challenging for Christians in the business world to create a distinction between the business and the Christian world. Ideally, Christians always aim to ensure that they exercise morality when mixing business and Christianity worlds (Kim et al., 2012). From time to time, Christians always go through challenges when attempting to attain such a balance between these two distinct worlds since Christians depend on businesses and occupations as sources of their livelihoods and to get their daily bread. Therefore such places these Christians in compromising situations whereby they may end up engaging in immoral activities or losing their moral touch as they navigate through their daily lives. Consequently, Christians should place their trust and hope in God as their source of livelihood so that their needs may be satisfied by God, and they should not, therefore, place full dependability on other people to satisfy these needs. God provides for all the living organisms in the world, and that does not exclude human beings or Christians since even birds get fed by God.
Therefore Devon, Carl, Bill, and Alex should make a solid decision and choice on which form of business to adopt and ensure that such a business form resonates with the ideal lifestyle of Christians in Christianity. Such is because some of the features of a limited liability company, like tax avoidance, may be better for the Christian faith since it does not promote morality. Therefore, Devon, Carl, Bill, and Alex need to take carefully consideration of the above information so that they may choose the best business form which also best applies to them as Christians and promotes Christian beliefs and faith.
Conclusion
From the above analysis and evaluation, it is apparent that Devon, Carl, Bill, and Alex should choose a limited liability company since it safeguards them and satisfies their needs of not wanting liability related to the company. Also, the best business form from a Christianity perspective may not be a limited liability company. Therefore Devon, Carl, Bill, and Alex have to select one of the business forms provided in this paper that provides a strong foundation of their Christianity morals and also supports the business aspect.
References
Beaudrot Jr, C. R., & Houghton, K. (1993). Effective Use of Limited Liability Companies in Georgia: An Overview of Their Characteristics and Advantages. Mercer L. Rev., 45, 25.
Bosko, M. (1993). The Best of Both Worlds: The Limited Liability Company. Ohio St. LJ, 54, 175.
Fernando, J. (2022, July 31). What is an LLC? limited liability company structure and benefits defined. Investopedia. Retrieved March 27, 2023, from https://www.investopedia.com/terms/l/llc.asp
Gomtsian, S. (2015). The governance of publicly traded limited liability companies. Del. J. Corp. L., 40, 207.
Kim, D., McCalman, D., & Fisher, D. (2012). The sacred/secular divide and the Christian worldview. Journal of Business Ethics, 109, 203-208.
Mancuso, A. (2021). Form your own limited liability company: create an LLC in any state. Nolo.
Merchant, C. (2000). Partnership ethics: Business and the environment. The Ruffin Series of the Society for Business Ethics, 2, 7-18.
Schwidetzky, W. D. (2008). Integrating subchapters K and S-just do it. Tax Law., 62, 749.
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