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Limited Liability Corporation and Partnership

In: Business and Management

Submitted By santius07
Words 1055
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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 case they would have to pay corporate income tax. If the LLC is organized with a sole owner, that owner can chose to be taxed as a sole proprietor. Therefore profit and loss is passed through to the owner and filed on a 1040 schedule C. (Beesley, 2012) Taxation as a multi-member LLC will be covered in better detail while discussing partnership taxation.
There are benefits and drawbacks to...

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