Question

Is the public served by the availability of business formats which protect individuals from personal liability? Identify and Describe the alternatives? Do you agree with the availability of business formats that protect individuals from personal liability? Defend your position.

Answer 1

There are five common alternatives of business formats:
1. Sole Proprietorship
2. Partnership
3. Corporation
4. Limited Liability Company
5. Franchising
Of course, if you form an LLP or corporation, you expect the entity to shield you from personally liability. And, if you do things properly (forming the LLP, corporation or other type of entity) and maintaining it properly, it will provide a lot of protection. However, it’s not bulletproof.
In my opinion ultimately, there is risk in business as in life. If formed and managed properly, though, a corporation, limited liability company, benefit corporation or other entity can help protect you from some of your business risk and ensure that it’s an acceptable amount of risk relative to the upside in your business. Observing these basic considerations will maximize the likelihood that the benefits and purposes of limited liability will be preserved

Since forming an LLP or corporation or other limited liability entity will not protect you from every possible risk and liability out there, consider business liability insurance. Also, take operational steps to reduce risk, such as implementing strong company policies (including hiring and management policies) and workplace training.