Underpinnings of Business Law

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Requirement

Constitutional and Legal Underpinnings of Business Law/Limited Liability Companies and Please answer discussion questions separately and list references separately for each discussion.
Underpinnings of Business Law

Solution

Discussion 1

The Constitution of the United States is that document which is the very basis and the most fundamental for determination of the power so imposed on the federal government along with the Commerce Clause under Article 1, section 8(3) of the US Constitution (U.S. Constitution - Article 1 Section 8) which allows the regulation of the trade and commerce, both in between the states and also internationally. This particular clause has an emphatic effect on the business and under this provision, the power so delegated was only for ensuring the uniformity of business. But, Supreme Court in (United States v. Lopez, 1995) held that commerce clause will have limitations if the Congress ousts the constitutional authority so vested on them. 

Based on the Commerce Clause under Article 1, section 8(3) of the US Constitution, if applied to the prospects of the business I am into then I will get much help out of this Commerce Clause under Article 1, section 8(3) of the US Constitution, since this particular clause allows the interstate trade business, which essentially means that there will be regulations provided by the government and based on that there will be the explicit suggestions of concerns relating to economic activity, which will help me guided throughout the business. On the other hand, this Commerce Clause under Article 1, section 8(3) of the US Constitution can also limit the business when there will be the possibility of overriding the authority by the Congress in aspects of banning certain products or services or things pertaining there to.

References

• U.S. Constitution - Article 1 Section 8. (n.d.). U.S. Constitution - Article 1 Section 8. Retrieved from https://www.usconstitution.net/xconst_A1Sec8.html

• United States v. Lopez, 514 U.S. 549 (1995) (Supreme Court 1995).

Discussion 2

Corporation is a separate legal person and hence pays the tax separately and on only those incomes and expenses which is borne by the corporation and not for the one borne by the owners. So, here is a double taxation aspect which happens for these C corporations, for taxing the profit primarily at the corporate level and then again getting taxed in the form of dividends at personal level for the owners. 

On the other hand, S corporation status can be elected after the incorporation and that can be done after filing the form with the Internal Revenue Service and also with the state where the business is located and in so doing the it is the corporation through which the tax items pass to the personal tax, and thus the risk of exposure to audit gets lowered (Form 1120-S--U.S. Income Tax Return for an S Corporation ). 

Again, for the Limited liability company i.e. LLC, although the personal liability protection prevails, still the shareholders for the S corporation are employees, whereas the members for the LLC are self- employed which means that tax calculation gets differed and is reported in (Schedule C (Form 1040), Profit or Loss from Business), the same one for S corporation for the higher rates of audit. 
 As soon as the incorporation takes place, it automatically becomes a C corporation, and LLC and S corporation is similar except the tax liability issues, so, considering the tax liability, LLC is a more plausible business options than S corporation, due to the fact that owners of the business is in more advantageous position in LLC. 

References

• Form 1120-S--U.S. Income Tax Return for an S Corporation . (n.d.). Form 1120-S--U.S. Income Tax Return for an S Corporation . Retrieved from https://taxmap.irs.gov/taxmap/ts0/form1120susincomet_f_189fc4d8.htm

• Schedule C (Form 1040), Profit or Loss from Business. (n.d.). Schedule C (Form 1040), Profit or Loss from Business. Retrieved from https://www.irs.gov/pub/irs-pdf/f1040sc.pdf