Legal Aspect of Business

Legal Aspects of a Business

Subjecc: Princples of Business

Introduction

When starting up a new business it is very important to look at the legal aspects which will influence the company in the future. In this part of the information file there will be the most important legal aspects for running a student company. First there is the selection of business form, in which there will be a compairison between the different possible forms. Afterwards a description of how the student company will work with contracts and partners. And finally there is an explanation of the typical dutch legal aspects such as profit tax and dividend.

Business form

Most important before starting the actual business is to compare the different possible legal business forms to make sure that it suits the intentions of the entrepreneurs. First the expanation per legal form will be given and afterwards a choice will be made for the student company itself. There are three basic legal business forms which can be chosen when starting up a new company: sole proprietorship, partnership and corporation. Each will be described shortly and afterwards the form of the student company will be given.

Sole proprietorship

The sole proprietorship is the oldest, most common, and simplest form of business organization. A sole proprietorship is a business owned and managed by one person.
The prevalent characteristic of a sole proprietorship is that the owner is inseparable from the business. Because they are the same entity, the owner of a sole proprietorship has complete control over the business, its operations, and is financially and legally responsible for all debts and legal actions against the business. Another aspect of the "same entity" aspect is that taxes on a sole proprietorship are determined at the personal income tax rate of the owner. In other words, a sole proprietorship does not pay taxes separately from the