Toxic Waste Management Case Study

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Recommended: Sources of finance for a start up enterprise

Stan 's plan to operate a toxic waste disposal business as a sole proprietorship raises two significant concerns. As a sole proprietor, Stan will assume unlimited personal liability for all business obligations as there is no legal or practical separation between the business and the owner. Any financial obligations or legal torts would apply to the business, and also, his personal assets. Secondly, Stan, as sole proprietor, can only borrow money directly, limiting growth, and could be considered a risky investment for lenders when they assess his ability to repay the debt, and the nature of the business.

Stan must consider the consequences involved in running a sole proprietorship that exposes him to unlimited personal liability both financially …show more content…

Due to the risk of environmental hazard with toxic waste disposal, the need to purchase several vehicles, acquire an approved landfill, hire several employees, and secure financial funds, sole proprietorship, with unlimited personal liability, would not be advisable. Although a partnership would help Stan get more financial and operational support, he still would be subject to unlimited personal liability for his own actions and potentially for his partners actions (depending on the type of partnership he uses). Since a corporation exists as a separate legal entity that owns property, rights, and liabilities separate from the owner, Stan would have limited personal liability (theoretically he cannot lose more than he put in to the business); and he could use equity financing to lower the amount of his financial debt, provide better repayment options, and improve the possibility of business success. Additionally, even though the corporate veil may be pierced, this is not a common occurrence and would only occur in cases of serious wrongdoing. Therefore, of the three options for Stan 's toxic waste business, a corporation would serve him best as it is the only form of business organization to provide him with both limited personal liability and equity financing options for

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