LIABILITIES FOR A SOLE PROPRIETOR FITNESS OWNER

Liabilities for a Sole Proprietor Fitness Owner in NY State

Liabilities for a Sole Proprietor Fitness Owner in NY State

Introduction

Corporate liability for a sole proprietor is a foundation of corporate social responsibility. Corporate social responsibilities, at the most general level, include economic duties, legal and regulatory compliance, responsiveness to ethical norms, and discretionary social welfare contributions. In addition, one of the most basic of all corporate social responsibilities is corporate liability (Zhao, 2006). It is defined as the continuous, systematic, and public communication of information and reasons designed to justify an organization's decisions, actions, and outputs to various stakeholders. According to this definition, corporate liability is primarily a form of ethical communication directed toward those parties who are affected by corporate activities and effects (Koch, 2002).

Corporate liability represents a corporation's social responsibility to explain its actions (past, present, and future) in an accessible, reasonable, and meaningful way to the society in which it operates. In a democratic society dependent on informed political discourse and deliberations, corporate liability is a necessary foundation for the system of free enterprise (Fogel, 2006). The appropriate level of corporate liability underpins the legitimacy of corporate autonomy and decision making in a system of democratic capitalism. In such a system, business enterprises enjoy a high degree of economic freedom of choice and are expected to engage in activities that promote the interests of the business. This economic freedom, however, is contingent on the existence of strong liability mechanisms. There are various traditional institutional mechanisms, both external and internal to the corporation, designed to enhance and strengthen liability to stakeholders.

Liability of the Owner

A limited liability company (LLC) is a legal entity formed under state law with similar characteristics as a corporation. Businesses choosing the LLC option for their entity achieve the goals of limiting the liability of their owners, creating management by their owners, and reducing company taxes. The beneficial owners of interests in an LLC are called “members.” Like shareholders in a corporation, LLC members share in the LLC' profit and loss. Members control the LLC with voting rights. Operations of an LLC are usually directed by “managers” who may or may not also be members. The LLC is created by filing articles of organization with the state' secretary of state. The document governing the relationship between the members and the entity and between the entity and the managers is called the operating agreement (Klapper, 2006). The typical operating agreement contains provisions regarding management of the LLC, voting rights of members and managers, contributions and distributions, admission of members and assignment of membership rights, and dissolution.

International comparison shows that small firms employing fewer than 250 employees are strikingly more important in some countries than others (Ayyagari, Beck, & Demirgüç-Kunt, 2007). For example, small businesses account for 68.7% of formal employment in Denmark but only 5.38% in Ukraine. On average, high-income countries rely on small businesses to contribute about 60% of the total employment and over 50% of GDP, whereas low-income ...