Rule of law

There are many complicated laws concerning contracts and hiring of employees, none being simply black or white. He recommended an LLC, as far as a business goes. Most people who do not know much about business might automatically think that a sole proprietorship is the way to go. But that is the quickest way to lose everything if your business goes under. As quoted in the book, “If an individual runs a business without taking any formal steps to create an organization, she automatically has a sole proprietorship. It is, if you will, the default option. She is not required to hire a lawyer or register with the government. The company is not even required to file a separate tax return—all profits and losses flow through to the owner and are reported on her personal return.” (Beatty, J.F. & Samuelson, pg. 373). That means if you run into financial trouble, the debtors can come after your personal belongings to settle the debt, including your house, car, and any other valuables.

But is it always better to go with an LLC instead of an S corporation? The book explains, “When starting a business, which form makes the most sense—LLC or corporation? The tax status of an LLC is a major advantage over a corporation. Although an S Corporation has the same tax status as an LLC, it also has all the annoying rules about classes of stock and number of shareholders. Once an LLC is established, it does not have as many housekeeping rules as corporations—for example, it does not have to make annual filings or hold annual meetings. However, the LLC is not right for everyone. If done properly, an LLC is more expensive to set up than a corporation because it needs to have a thoughtfully crafted operating agreement. Also, venture capitalists almost always refuse to invest in LLCs, preferring C corporations instead. There are four reasons for this preference:

• Complex tax issues,
• C corporations are easier to merge, sell, or take public,
• Corporations can issue stock options, and
• The general legal uncertainty involving LLCs." (Beatty, J.F. & Samuelson, pg. 381).

As far as the drug testing for employees, I had seen a quote from the book stating, “The federal government and most states permit private employers to administer alcohol and drug tests, and a substantial number do. However, the Equal Employment Opportunity Commission (EEOC), which is the federal agency charged with enforcing federal employment laws, prohibits testing for prescription drugs unless a worker seems impaired.” (Beatty, J.F. & Samuelson, pg.329). So it seems as if the only way to get out of drug testing is if you are a federal employee.