Premium Essay

Limited Liability Corporation and Partnership Paper

In: Business and Management

Submitted By Kspencer
Words 901
Pages 4
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 as they like, and corporations are allowed to be members. LLCs enjoy freedom from the state-mandated membership and management reporting requirements that corporations have. Most important, LLCs do not have to pay taxes. Instead, their profits and losses are passed through to their members' individual tax returns in the same way as a partnership. As a result, members enjoy the advantages of...

Similar Documents

Premium Essay

Limited Liability Corporation and Partnership Paper

...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......

Words: 832 - Pages: 4

Premium Essay

Individual Assignment: Partnership Paper

...Assignment: Partnership Paper FIN/419 March 19th, 2012 James Hagist Individual Assignment: Partnership Paper For this individual assignment titled partnership paper, I will write a 700-word paper in which I explain the roles of limited liability corporations and limited liability partnerships. In addition to explaining the roles of limited liability corporations and limited liability partnerships I will describe establishing my own company. Roles of Limited Liability Corporations The “Internal Revenue Service" (2012) website states that a Limited Liability Company (LLC) is a business structure allowed by state statute. LLCs are popular because, similar to a corporation, owners have limited personal liability for the debts and actions of the LLC. Other features of LLCs are more like a partnership, providing management flexibility and the benefit of pass-through taxation. There are advantages and disadvantages to being in an LLC, let’s start with providing the advantages, advantage one is taxes, when you are in an LLC there is no double taxation, advantage number two is liability, an LLC offers the same protection against liability that a corporation holds. The disadvantages, disadvantage number one is number of owners, an LLC must have at least two owners or members, disadvantage number two is taxes, an LLC must pay self-employment taxes. Roles of Limited Liability Partnerships According to "Nolo" (2012), a limited liability......

Words: 712 - Pages: 3

Premium Essay

Legal Forms of Business Organization

...Limited Liability Corporation, Limited Liability Partnership, Corporation Paper Angelika Evanoff FIN/419 July 20, 2015 Mrs. Michele Huss Limited Liability Corporation, Limited Liability Partnership, Corporation Paper The purpose of this paper is to discuss three legal forms of business organization; a limited liability corporation or company, a limited liability partnership, and a class C corporation. The paper begins with a brief description of each structure, followed by a comparison and contrast of each form’s advantages and disadvantages. The author finishes by citing examples in which she would use each type of business structure if establishing a new business. It is important to choose the appropriate legal form of organization because the decision affects owner’s risks, raising money, and how profits are taxed (Gitman & Zutter, 2014). Readers can expect to have a better idea of the various options available to entrepreneurs after reading this essay. Legal Forms of Business Organization The three most popular structures of company organization are the sole proprietorship, the partnership, and the corporation. A sole proprietorship has one owner while a partnership has two or more owners, and a corporation is an entity created by law (Gitman & Zutter, 2014). The forms offer limited liability or unlimited liability to its owners. Various structures that provide limited liability include a limited liability corporation, limited liability partnership, and......

Words: 1062 - Pages: 5

Premium Essay

Business Structure Differenciations

...the legal liability of the owners. There are four different types of business structures; sole proprietorship, partnerships, corporations, and Limited Liability Partnership (LLP) (Parrino, Kidwell & Bites, 2012). Start-ups and small business perform as either sole proprietorship or partnerships because of the small operating scale and capital requirements. However, the larger a firm grows, the greater the benefits to organize as a corporation (Parrino, Kidwell & Bites, 2012). This paper will introduce these four different types of business structures stated in the above, and explain how each business might and might not be advantageous. Therefore, this paper will help the business owners, who will start the business, to determine which type of business structures they like to start. This paper will also help the business owners to determine which next path they like to select if their business grows and expand. Sole Proprietorships A sole proprietorship is a business owned by a single person. A sole proprietorship might provide several advantages as follows: The business owner can start the business with an inexpensive way because there are minimal fees to obtain a business name and certificate. Therefore, business owner can start out with limited funds and hold absolute authority on decision-making (University of Phoenix, 2013). Furthermore, profits, which a sole proprietorship makes, are subject to lower income taxes than are those from corporation......

Words: 806 - Pages: 4

Premium Essay

Fin-419 Week 1 Paper

...Head: LIMITED LIABILITY CORPORATION AND PARTNERSHIP PAPER Limited Liability Corporation and Partnership Paper A.J. Smith FIN-419/Finance for Decision Making December 9, 2013 Limited Liability Corporations and Partnerships Introduction Legal forms of business organization are important aspects of financial management. Ownership structure, articles of organization, legal rights and liabilities of members, and other features of a business organization ultimately affect financial management decisions. The three most common legal forms of business organization are the sole proprietorship, the partnership, and the corporation. The share of corporations and partnerships in the overall economy becomes ever larger. In this paper, limited liability corporations and partnerships are analyzed with respect to their comparative advantages and disadvantages. Limited Liability Corporation Limited liability corporation (LLC) is one of the organizational forms that provide owners with limited liability. The LLC is permitted in most US states and gives its owners limited liability and taxation as a partnership. LLCs work well for corporate joint ventures or projects developed through a subsidiary (Gitman, 2009, p. 8). According to Bagley (1994), the LLC “is a statutory business entity that fits between the corporation and the partnership.” Basically, the LLC can be said to fill the business need recognized, but not satisfied, by the S corporation and the limited partnership. As......

Words: 1098 - Pages: 5

Premium Essay

Limited Liabilities and Partnerships

...Limited Liability Corporations and Partnerships Paper Limited Liability Corporations and Partnerships Paper Business owners, when starting their company, have a decision to make; either start it on their own or start it up with someone else backing them. If they start on their own small business then they have to come up with the funds to do so. If they don’t have those funds they can try to get a loan. Owners may find that starting a business may require large amounts of funding that the owner may not have and the loan amount may be too large for them to be approved for. Options are available to be able to start their small business. Limited liability corporations and limited liability partnerships are just two of those options. Both have their advantages and disadvantages and in this paper we will discuss what limited liability corporations and limited liability partnerships are and which situation best suits each option. Limited Liability Corporations and Partnerships Liabilities are a part of all businesses. All businesses develop debt that the owners are responsible to pay off during their business’ lifetime. What limited liability corporations and partnerships do is limit the responsibility of the owner when it comes to paying off the debts obtained. Limited liability corporations, gives its owners, like those of S corps, limited liability and taxation as a partnership (Gitman, 2006). Like all other corporations, limited liability corporations,......

Words: 724 - Pages: 3

Premium Essay

Legal Forms of Business

...considering the preferred legal form of business, it comes down to the level of liability, the size of the business and the number of owners or shareholders that will be involved. It is important to consider that with the increased size of a business and the increase in the number of owners, the decision-making process becomes more complex. The level of liability for the owners decreases as the owners no longer are liable for the losses and gains of the business within larger legal forms of business. Of the legal forms of business; sole proprietorship, partnership, limited liability partnership, limited liability company, S corporation, franchise, and corporate; some businesses may only qualify to be classified as one or two of the legal forms of business, making the decision easier for the owners to choose. Sole proprietorship: A sole proprietorship is a for-profit business owned by one person who may operate the business alone or employ others. The sole proprietor of the business is responsible for assets, losses, and debts. There is also no legal distinction between the sole proprietor and the business (Cheeseman, 2012). A small business, such as a coffee shop would be a prime candidate for a sole proprietorship. The owner could run the coffee shop alone or employ others to operate the business. A sole proprietorship can be more difficult to raise long-term capital for, because of unlimited liability and that the business depends on the health of the owner. ......

Words: 2170 - Pages: 9

Premium Essay

Llps and Llcs

...Limited Liability Corporation and Partnerships FIN/419 December 19th, 2011 James Hagist There are multiple legal forms of business, each developed and selected by business owners depending on the needs of that business. Each legal form of a business has specific ownership and taxation laws and regulations that assist business owners in making the decision on which selection to make. Among the three most common legal forms of business are partnership and corporation. This paper intends to explain the roles of limited liability corporations and limited liability partnerships. A corporation is a business that has been given rights that an individual has by the government. Limited liability corporations are companies that limit the liability of its participants by the assets in which they contributed to the organization. This means that the business can be sued by an individual or another business and can lose its gained assets. Although a limited liability corporation and its individuals can be sued, the limited liability portion ensures that an individual cannot lose more than they have invested in the company. A Limited liability corporation provides its owners with the opportunity to partake in limited liabilities and taxation like partnerships can. This type of business is good for business ventures involving two people. Owners of a limited liability corporation are called members. Members often......

Words: 969 - Pages: 4

Premium Essay

Legal Forms of Business

...Legal Forms of Business Paper University of Phoenix LAW/531 Aaron Gershonowitz November 7, 2011 Legal Forms of Business There are many different forms of business in today’s society. They run from sole proprietorship to corporate form. When someone wants to start a business, he/she has to decide what form of business he/she wants to be a part of. Of all the forms of business out there, this paper will be discussing seven of them, along with scenarios that each of these seven forms would be preferred. The forms of business being discussed in this paper will be: sole proprietorship, general partnership, limited liability partnership, Limited Liability Company, S corporation, franchise, and corporate form. Sole Proprietorship A sole proprietorship is a business that is owned by one person. Someone new to the business world would want to start out having this type of business if he/she wants to keep the business small. There are several major advantages to operating a business as a sole proprietorship, and they include the following: • Forming a sole proprietorship is easy and does not cost a lot. • No federal or state government approval is required. • The owner has the right to make all management decisions concerning the business, including those involving hiring and firing employees. • The sole proprietor owns all of the business and has the right to receive all of the business’s profits. • A sole proprietorship can...

Words: 2416 - Pages: 10

Premium Essay

Traditional and Nontraditional Litigation

...Legal Forms of Business Paper 531kjm LAW531 January 1, 2010 Abstract This paper looks at the various legal form of business. Each form of business is better suited to certain uses, and in this paper each form is matched with suitable business ventures. The different forms of business being examined are partnership, limited liability company, sole proprietorship, limited liability partnership, franchise, s corporation, and corporate form. Legal Forms of Business Paper Sole proprietorship is often preferred by individuals who are seeking to maintain managerial control. Ventures such as a small coffee shop, small restaurant, or a small store are good candidates for sole proprietorship. All of these generally have a low overhead, and are very unlikely to face liable issues. A sole proprietorship may also include the spouse of the individual who is standing as the sole proprietor (Ingram, 2012). A partnership has to be carefully considered. There are many things which might cause this venture to become a disaster. A partnership often begins with two individuals with the same interests, and common goals. In some cases the main reason for the partnership to begin is that one person has the ideas and the other has the financial wherewithal. Two physicians may form a partnership to cut down on the overhead of paying for individual leases for the property. In a partnership all partners are liable for the actions of the others. If one gets charged with......

Words: 720 - Pages: 3

Premium Essay

Financial Risk Management

...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......

Words: 905 - Pages: 4

Premium Essay

Legal Forms of Business

...Week Two: Individual Paper: Legal Forms Of Business with Supporting Scenarios Chanel Moore-Bass Law/531 Business Law March 19, 2012 Carmina Perez-Fowler, UOPX Faculty Online Week Two: Individual Paper: Legal Forms Of Business with Supporting Scenarios There are seven major forms of business: sole proprietorship (sole trader), partnership, limited liability partnership (LLP), and limited liability company (LLC), subsidiary or subchapter corporation (S), franchise, and corporate/company (C- traditional). The various forms of businesses are established and recognized by state laws. To determine the type of business form to use, it is important to know the differences, advantages, and disadvantages. Sole trader/proprietor is the clearest and simplest form of business to establish. It is just one owner, debt/tax liabilities fall on the owner, the income (profits/losses) reports on personal tax return. Examples of sole proprietorship are franchise, self employment, and independent contractor. Advantages are total autonomy of the business, no legal procedure to setup, no set hours/wages, and no shareholders. Disadvantages are if owner dies the business dissolves, full responsibility of tax/debt liabilities, difficulty obtaining long-term financing, and personal liability if sued. General partnership is more than one owner, involving verbal or oral agreement but not filing paperwork to create a specific entity, such as a corporation or LLC, either partner can bind the......

Words: 1219 - Pages: 5

Premium Essay

Limited Liability Corporation and Partnership

...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......

Words: 1055 - Pages: 5

Premium Essay

Ford

...proprietorship, partnership, limited liability partnership, limited liability, S Corporation, franchise, and corporate. This paper will discuss each form of business and justify why the corresponding business form is preferred. Sole Proprietorship A designer opens a small store to sell their jewelry and art work. The designer does not want to go into business with anyone. This is example of sole proprietorship. Sole proprietorship is the most popular and least complex form of a business organization. The profits that the sole proprietor made would not have to be shared with anyone. The owner would not have to consult with anyone on what decisions were going to be made for the business. With Sole proprietorship, the rules are not conventional on how to run the business. They could combine the business and personal assets. Partnership Two college buddies decided to open an eye care center after they finished college and training. This is example of general partnership. A partnership is a type of business that two or more people start. They can begin the business with just a hand shake. Generally, partners have a lawyer draw up some type papers explaining everything. With a partnership, there are more than one person contributing his or her finances and skills. They share the responsibilities of the company equally. With taxes in a partnership, the company is not taxed, but each partner is tax on the income he or she made. Limited Liability......

Words: 858 - Pages: 4

Premium Essay

Business Entities: Choices as Defined Within the State of Texas

...in the business’ taxation procedure. The tax liability one is responsible for depends greatly upon the election of a particular entity whether it is a Limited Liability Partnership, Limited Partnership, Limited Liability Company, S corporation, C Corporation, or a Business Trust. Within each of the different organized entities federal law has provided each organization with separate and distinct procedures in accounting for its assets in relation to its tax liability (Drucker, 1989). Limited Liability Partnership A limited liability partnership more commonly known as a LLP engenders aspects of both partnerships and corporations, two entities that will later be explored in greater detail. One should elect to enter into a limited liability partnership if investors wish to partake in the management of the business. Just as in a partnership or limited liability company, the profits of a LLP are dispersed among the partners for tax purposes, ultimately avoiding the problem of “double taxation” which is often exhibited in corporations. Similar to that of the shareholders of a corporation all partners in a LLP have a form of limited liability, however contrary to corporations partners actually possess the authority to manage the business directly. In the state of Texas a partner is not individually liable for debts and obligations of the partnership incurred while the partnership is a registered limited liability partnership. The...

Words: 3745 - Pages: 15