...Limited Liability Corporation and Partnership Jacob Sanchez FIN-419 December 22, 2014 Michele Huss Limited Liability Corporation and Partnership Introduction Many people attempt to start businesses annually and need a little guidance on what their best choices are for forming the blueprint of their future endeavors. Limited Liability Corporations and Partnerships are a couple choices that can be chosen by some entrepreneurs. They have some things in common, and also have distinct differences. This paper will discuss how each type of business entity is formed, the tax benefits, some advantages and disadvantages. Lastly, these things will be evaluated to determine under what circumstances one should be chosen over the other. Limited Liability Corporation A Limited Liability Corporation, from now on an LLC, is a less complex formation of a corporation. It is formed by filling an articles of organization with the states Secretary of State office. This article will include the business name, the members, and in some states an operating agreement. (U.S. Small Business Administration, n.d.) In an LLC with more than one member an operating agreement is ideal, for structure and regulation. In most instances it will provide a roadmap of rights, arrangements, and profit sharing and loss. (U.S. Small Business Administration, n.d.) Taxation is an important aspect of forming a business, an LLC has many choices for taxation. An LLC can opt to file as a corporation, in which...
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...Limited Liability Corporation and Partnership Paper University of Phoenix FIN/419 November 26, 2012 Every business has a basic idea of the entity in which to establish. Capitalization and protection is the main focus to establish the business with a question of which type of entity should a business use to move forward. Businesses have a host of factors when making this decision, the most common forms of these entities are, partnership, corporation, sole proprietorship, and S corporation. A Limited Liability Company (LLC) is a business structure allowed by the different state statutes. The following will list two of these entities and the business entity which I would choose. Limited Liability Corporation Limited Liability Corporation has a unique quality of being structured like a regular corporation, and having the attributes of a partnership. In a Limited liability corporation the owners are protected from personal liabilities, which are similar to a corporation, but have the tax advantages of the partnership. This means the creditors of the business may not pursue any of the personal assets of members of the LLC to recover any business debts. Also if a member of the LLC has any personal debt, the creditors may not attempt to recover from the corporation. LLC owners, called "members," can manage their businesses or hire professional managers. In addition, LLCs enjoy a lot of flexibility. For instance, they can have as many members...
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...Limited Liability Corporation and Partnership Paper K. Smith FIN/419 June 2, 2014 The thought of running your own business can be very overwhelming. There are many things to be considered when starting a business. It involves writing a business plan, choosing a location, knowing whether to get a loan or start the business with another individuals. Knowing whether or not you will start the business as an individual or with a partner will help with the next question. How will you structure the business? In this paper I will discuss the roles of the Limited Liability Company (LLC) and the Limited Liability Partnership (LLP). I will also include my opinion as to why I would choose an LLC or an LLP if I was starting a new business. A limited liability company (LLC) is an entity in itself somewhat like a corporation; an LLC can conduct business, open a bank account and obtain a tax identification number. Owners of an LLC can choose to run the business themselves or hire someone for the day-to-day affairs of the business. An LLC can have one to several members including corporations as members (Paul, 2011). The owners of an LLC have limited liability meaning they are not liable for the debts and liabilities of the company. Creditors cannot hold the owners of an LLC responsible for payment from their personal assets if the assets of the company are not enough to pay a debt. The LLP must have one person responsible for the legalities of the company not including silent partners...
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...Sole Proprietorship: A business structure in which an individual and his or her company are considered a single entity for tax and liability purposes. There is no legal distinction between the owner and the business itself. ·Liability - Seeing as there is there is no difference between a company and the owner with a sole proprietorship, the proprietor has unlimited liability, meaning the owner of the business is personally responsible for all debts, contracts, and obligations the business has. Unlimited liability puts all of the proprietors assets (home, cars, bank accounts, etc.) at risk should a lawsuit not covered by insurance arrive, or should debts go unpaid. ·Income taxes- With no legal distinction between the owner and the business, income from the business is taxed as normal personal income. Tax rates are dependent on the state, but individual income tax is by and large high. ·Longevity/ Continuity- A sole proprietorship can only have a single owner, meaning no partners can be brought into the business. Seeing as the owner is the same as the business itself, if the owner were to die, the business also dies. The assets of the business become part of his/her estate. Sole proprietorship businesses can be dissolved as quickly as they can be created; the business assets can be sold or given away. ·Control- One advantage of a sole proprietorship is that the owner of the business has a large, near total amount of control. The owner can ultimately make all decisions...
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...Limited Liability Company (Societate cu Raspundere Limitata) A limited liability company is a corporation established by maximum 50 associates. The business relies upon the foundation documents. The registered capital of a limited liability company cannot be less than 200 RON. The registered share capital of a limited liability company is usually split into social parts/shares, with a registered value of minimum 10 RON. The law forbids the shares of these corporations to be involved for loans or other banking operations. Shares cannot be freely exchanged, making limited liability companies, more or less, like private companies in other countries. Limited liability companies may very well be constituted by only one individual. The law stipulates that resolutions are made by mainstream ballot in the General Meeting of Shareholders (each share represents one vote). Decisions involving adjustments in the articles of association have to be accepted by all shareholders, if the documents do not mention otherwise. Minimum one Manager is assigned in the articles of association contract, the same person who is responsible for the management of the company. Nowadays most of the Romanian corporations, regardless of the nationality of their owners, are limited liability companies SRL. | Joint Stock Company (Societate pe Actiuni) A joint stock company is a limited liability corporation (legal person) with registered capital of a minimum of 25.000 EUR or the equivalent of 90...
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...separate entity from the proprietor which makes autonomous. Liability - if you enter into a sole proprietorship, you have unlimited liabilities associated with your business. You will be liable to the full extent of your assets for any business liabilities. Income taxes - as a sole proprietor, when you file taxes, you would file it under your own personal income taxes. Sole proprietor do not have anyone withholding their taxes. You do have to keep me in mind that as a sole proprietor you are responsible for budgeting you tax liabilities. Continuity of the organization - as a sole proprietor, when you die, the business dies. Control - as a sole proprietor, you have total control of the business. As the sole owner, you do not share any responsibilities with anyone else. Profit retention - as a sole proprietor, any profit made from the business would only be distributed to the sole owner. There are not partners associated with sole proprietorship. Expansion - as a sole proprietor, you have autonomy or flexibility with your business. Since sole proprietors are not seen as legally separated from their business, the ease of expansion is uncomplicated. Compliance - there are minimal reports you have to file with the government and there is no restrictions on the operations of your business. General Partnerships: is a partnership that is formed with two or more people establishing a business to make a profit. Liability - since each partner is considered a general partner, each...
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...These shares give her a percentage of the vote on board elections, management decisions and so on. The shares also give her unlimited responsibility for outstanding unpaid liabilities. Unless she sells her shares of the company, then she’s liable for principal and interest obligations on bonds or other outstanding loans. Limited Liability Company: If Ashley’s company was a member of a limited liability company, then she would only have limited liability on company debt and her personal assets are usually protected. If the company entered into a loan or contract that required the members to sign personal guarantees, then she would still be personally liable for some corporation debts. Partnership: EBAY, Twitter, and Google are all partnership companies. A partnership is a business structure in which the owners (partners) share the profits and losses. They pass them along to its owners and offer tax advantages to the company. Each partner in the partnership pays taxes on the distributions based on their individual tax rate. With the liability shield of a corporation, they may be exposed to a greater degree of personal liability. Sole Proprietorship: This is the most common and simplest form of business ownership, is preferred by most entrepreneurs because it offers advantages that partnerships and corporations can’t provide. It’s cheap, easy to form, and gives you complete control and decision making power. Joe’s auto repair is a good example of a self-owned business where he doesn’t...
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...Task 1-A Sole proprietorship 1. Liability An owner has unlimited liability both personally and as the company owner. Liability is a disadvantage in a sole proprietorship. 2. Income taxes Owners are responsible for filing taxes and is allowed to file taxes as part of their personal income taxes. 3. Longevity This depends completely on the owner and there continued ability to operate the business. The operation of the business can be significantly affected if the owner becomes sick or dies. 4. Control owners have complete control of the business. The owner is totally responsible for all decisions pertaining for business operations. 5. Profit retention Owner have 100% profit retention. They may choose to invest it back into the company or use it for personal use. 6. Location The owner has the ability to choose the location of the business or move it to a better location as they choose. 7. Convenience/burden Sole proprietorships are very convenient and easy to start up since there are no governing laws as there may be with a corporation. The burden of the business including decisions made that may affect the businesses success are the sole responsibility of the owner. General Partnership 1. Liability Liability is shared by all partners of the business. Also, if one partner does something negligent pertaining to the business, all partners can be held liable for the one partners act. 2. Income taxes Partners...
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...Liability Exposure within Multiple Business Organizational Forms BUSINESS FORM LEGAL ISSUE PERSONAL LIABILITY EXPOSURE Sole Proprietor Sued for breach of contract The personal risk of exposure to liability is considerably high; the sole proprietor assumes unlimited personal liability for the breach of contract lawsuit and, under this business entity, puts all personal assets at risk for the sake of the organization itself. General Partnership Sued for breach of contract The personal risk of exposure to liability is considerably high; both the partnership property (organizational assets) and individual assets are at risk; however, only a portion of the lawsuit is satisfied by individual property – that is, what remains after partnership property has been accounted for. Limited Partnership (LP) Sued for breach of contract The personal risk of exposure to liability is moderate; the general partners’ property is severally liable and individual property is levied on once partnership property has been exhausted. Corporation Sued for breach of contract The personal risk of exposure to liability is low; shareholders are not personally liable. Directors may face civil liability. Limited Liability Company (LLC) Sued for breach of contract The personal risk of exposure to liability is low; members can be held personally liable, but commonly there is limited liability for the obligations/debts of the business. If the veil of limited liability is ‘pierced’ (Meiners, Mofsky & Tollison...
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...order. You should use Numbered Paragraphs and use Paragraph Titles. The style should be professional and courteous but in view of the many issues that need to be addressed, brief and to the point. You have been asked to act as a company promoter and to this end there are forms (Company Constitution and Memorandum of Associate) to find and fill out. NB If you are unable to find an IN10 Form do your best to make one up bearing in mind the need to set out Co. Name, Rules in relation to the conduct of meeting (AGM) and most important the allocation of shares, the voting rights attached to the shares and the distribution of profits. These should also be included in an Appendix. Ensure that you understand your responsibilities and liabilities as a “Company Promoter” This is a legal advice it should not contain generalised business / entrepreneurial advice The Mark...
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...must register their business names with the Registrar of Business Names. • They must obey all basic laws for trading and commerce. • There are advantages and disadvantages to everything, and here are ones for sold traders: Pros: • There are so few legal formalities are required to operate the business. • The owner is his own boss, and has total control over the business. • The owner gets 100% of profits. • Motivation because he gets all the profits. • The owner has freedom to change working hours or whom to employ, etc. • He has personal contact with customers. • He does not have to share information with anyone but the tax office, thus he enjoys complete secrecy. Cons: • Nobody to discuss problems with. • Unlimited liability. •...
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...businesses in the US, most notably during the market crash we experienced a couple years ago. Independent investors as well as other companies bought and shared stock with many of the big banking corporations, since the bands values began to drop, shareholders were trying to get rid of their stock in the company, just to be able to get their money back. This caused frenzy in the stock market, and we saw banks crash overnight. Banks no longer had the money to manage their day to day operations, and they found themselves actually in debt to many of their customers. So many customers lost their 401k’s and other investments, because the funds were simply no longer there, thanks to the withdrawal of banking investors. Another example is the new TV show, ‘Shark Tank’, where wealthy investors will give small business owners a chance to pitch a deal to them. The owner will ask for a certain amount of investment in order to grow their company, in return a share of the profits with the investor from their business. This is an interesting show to watch, because it kind of gives a more personal feel to the stock market, and insight as to how investors think and view businesses to decide on whether or not they would be a profitable investment. Limited liability Company In a limited liability situation, an Entrepreneur or business owner is not personally liable for the company. This is the way the business owners can protect their personal assets, in case their business goes bankrupt....
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...Concepts The term ‘share’ in The Companies Act (1994) entitling the ownership of company & shareholders are member of company. Therefore shareholder defined as member of company .A shareholder has certain rights and liabilities by law. Unlike the owners of sole proprietorships or partnerships, corporate shareholders are not personally liable for the company’s debts and other obligations. Also, corporate shareholders do not play a major role in running the company. The shareholders are the proprietors of the company. Definition of Shareholder A shareholder is an individual or institution that legally owns a share of stock in a public or private corporation. Shareholders are the owners of a limited company. They buy shares which represent part ownership of a company. The following persons are shareholders in a company namely- 1) Every subscriber of the memorandum of company shall be deemed to have agreed to become a member of the company and on its registration shall be entered as a member in its register of members. 2) Every other person who agrees to become a member of a company, and whose name is entered in its register of members shall be a member of the company. Right of Shareholder Stockholders are granted special privileges depending on the class of stock. These rights may include: The right to sell their shares. The right to vote on the directors nominated by the board. The right to nominate directors and propose shareholder resolutions. ...
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...general partnership has the most potential liability for all of then out of the three options. A partnership is not treated as a separate legal entity, therefore all of the owners would have unlimited liability, even Norm the friend who won't even be there. This means that all the assets that they all invested and their personal assets would be liable if creditors came after them or if they were sued by someone. Also another downside for Norm is that partners are all agents for each other. This means that anytime one of the other partners makes a decision concerning the business, Norm has been bound to that contract. So even though he will not be anywhere near the new business, any decisions made by the people there will make Norm liable to any adverse consequences. Another reason Norm wouldn't want this as an option is that all owners share joint and several liability for all debts. This means that a third party can sue all of the partners or just him for any decision that Laverne or Shirley made that brought the action. Norm would not even have to know about it. The general partnership benefits in ease of debt financing because of this kind of liability. Since all of the owners have unlimited liability, if one of the partners defaults on the loan, banks can go after not only the partnership, but each owner as well. However, it is harder for a general partnership to raise equity financing due to the unlimited liability. It is going to be near impossible for then...
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...Sole Proprietorship: There is no legal difference between the Sole Proprietorship and the owner. They are easy to create and can mature as quickly or slowly as the owner wants. There can only be one owner and raising capital can be difficult, so they seek funding from financial institutions. ● Liability The Sole Proprietor is personally responsible for all debts and obligations. Creditors can claim personal assets of business owners and can sue if there is a breach of contract. Income Taxes All income rendered is treated as personal income for the business owner. Ordinary personal income has the highest tax rate, but there are different income takes rates depending on the type of income being taxed. Being able to plane to take advantage of a lower tax rate is difficult for many sole proprietors. Longevity / Continuity The Sole Proprietor is the sole owner, with no partners in the business, if the Sole Proprietor becomes disabled, retires or dies the business is dissolved. It does not the perpetual existence of a corporation. Control The Sole Proprietor makes all the decisions and has total ownership over finances. Profit Retention 100% profit retention allows them to use the profit at their discretion. they can reinvest in their current business, start a new business or use it for personal reasons. Location Expanding or moving is not very complicated. Using a DBA name allows a Sole Proprietor to legally do business under a name other than their full name. To move...
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