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Financial Risk Management

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Submitted By willove0714
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Financial Risk Management
Douglas, Willie (week 1)
University of Phoenix
FIN/419
January 7, 2012

Finance Risk Management
Whether embarking in business ownership or partnership there is a certain amount of risk involved. An understanding of the various types of businesses, and the strengths and weaknesses of each, will definitely aide in making a good, sound business decision of which type of business to invest in. This paper will discuss the role of limited liability corporations and partnerships; and also provide a scenario of what circumstance would cause one to choose a particular type of business to invest in, or own, over of the other.
Roles of Limited Liability Corporations
Limited Liability Corporations also known as LLCs are numerous and they provide various products and services today. However, the roles of Limited Liability Corporations were established to grant protection to business members from losing their personal assets in litigation. According to Gitman, L. J. (2009), “LLCs are permitted in most states and may enjoy taxation as a partnership and can own 80 percent ownership of other corporations and partnerships” (pg. 8). “If the LLC is properly formed and operated under state law, its members are not personally liable for the entity’s debts and obligations. An LLC that has at least two members is classified as a partnership for federal tax purposes unless the members elect to be taxed as a corporation” (www.lexisnexis.com/lawschool/study/understanding/pdf/PshipTaxCh1.pdf pg. 12). Shares of LLC’s can be owned by non-residents of the U.S. Corporate joint ventures or projects developed through a subsidiary works best for businesses that are Limited Liability Corporations.

Roles of Partnerships
The roles of partnerships are to accomplish partner’s satisfaction in achieving goals and objectives. The bottom line of any financial investment

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