Critter Sitter’s Best Form of Business Organization
A sole or individual proprietorship may not be the best form of organization for Critter Sitters because of the unlimited personal liability for the debts that this type of organization incurs (Twomey & Jennings,, 2014, p. 916). Although Lauren does not have organizational fees or legal expenses that are necessary to file for Limited Liability Corporation (LLC) status there are benefits that outweigh these costs (Seth M. Colwell, 2012 ) (Twomey & Jennings, 2014, p. 916).
A single-member LLC are treated as a disregarded entity (§ 301.7701-3(b) (1) (ii)) unless they elect to be taxed as a corporation (Seth M. Colwell, 2012 ) (Twomey & Jennings, 2014, p. 928). Essentially, this does not change the manner in that Lauren operates Critter Sitters except for the fact that her personal liability is remedied by being an LLC (Twomey & Jennings, 2014, p. 928). She still controls all of the decisions and receives all the profits where earnings are taxed as personal income (Twomey & Jennings, 2014, p. 916).
The necessary costs incurred are filing fees and legal fees when forming an LLC (Seth M. Colwell, 2012 ) (Twomey & Jennings, 2014, p. 966). LLC’s must formally file articles of organization with the secretary of state that identify the “name, purpose, duration, registered agent, and principal office of the LLC (Twomey & Jennings, 2014, p. 966).”
Client Stop Payment on a Check
If Lauren had formed an LLC that would have necessitated a separate bank account, although even as a sole proprietorship this would have been a sensible choice as well (Twomey & Jennings, 2014, p. 928).
The stop payment on the check Lauren received for services is not affected by the fact that she is using her personal checking account for the business as a sole proprietor of for Critter Sitters. In addition, being a LLC with a separate bank account would not have altered Lauren’s position. Lauren can hold the bank; drawee, liable for the amount of the check if they have no proper grounds for stopping payment on the check (Twomey & Jennings, 2014, p. 649). If the check is wrongfully dishonored by the bank, drawee, is liable for any damages that Lauren, payee, is able to attain from the client or payer (Twomey & Jennings, 2014, p. 649). Checks are wrongfully dishonored if the account the check is written from has sufficient funds to pay the holder of the check and is a breach of contract if the payer has overdraft protection (Twomey & Jennings, 2014, p. 649).
If Lauren still has possession of the check and the stop payment was oral by her client she could legally cash the check at the end of 14 calendar days (Twomey & Jennings, 2014, p. 649). If the stop payment was a written order, it is effective for 6 months and must be reissued by the account holder if they do not recover the check and void it (Twomey & Jennings, 2014, p. 649). Although, the check is now stale the bank may still cash the check while...