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Llc vs. Llp

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Submitted By odimas
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Limited Liability Corporation and Limited Liability Partnership Onorio Dimas
University of Phoenix
FIN/419
James Hagist
04/01/2013

Abstract

America has been known for many years as the land of opportunity both for Americans as well as foreigners in regards to starting a business. But, as easy as it has become to start a business, it is also important to understand the different options there is when structuring the business. This paper will concentrate on two important structures that can be used when starting a business and those are a limited liability corporation (LLC), and a limited liability partnership (LLP). This report will identify two advantages and two disadvantages when using an LLC and LLP. It will also give the authors description of a personal business idea, along with the writers choice of corporate governance, and what the advantages will be of choosing either and LLC or LLP.

Limited Liability Corporation

A Limited Liability Company (LLC) is a business structure allowed by state statute, owners of an LLC are called members, most states do not restrict ownership, and so members may include individuals, corporations, other LLC’s and foreign entities (IRS, 2012). It is a corporate structure whereby the members of the company cannot be held personally liable for the company's debts or liabilities (Investopedia, 2013). For tax purposes it is important to remember that in order to be classified as an LLC two or more members need to be a part of the corporation. An LLC has many advantages, one of the most appealing advantages for members of a LLC are the taxation rules because owners avoid double taxation. Another advantage of an LLC is that in most states an LLC is very easy to form, and having limited liability attracts many business owners to form an LLC. One more advantage of an

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