Fin 419 Limited Liability Corporation
Limited Liability Corporation and Partnership
FIN419 - Finance for Decision Making
Date
Instructor’s name
Limited Liability Corporation and Partnership Paper
Limited Liability Corporation and limited liability partnership are two of several types of structures that individuals can give thought to forming when starting a business. To form a corporation each member has limited liability, but the corporation has full liability. Forming a partnership requires at least two people, which are called partners, and each partner has limited liability. This paper will describe the roles of Limited Liability Corporation (LLC) and Limited Liability Partnership (LLP). In addition, the paper will describe under what circumstance one would choose one instead of the other.
Limited Liability Corporation According to IRS.gov (Internal Revenue Service, 2011, para. 1), Limited Liability Corporation is a business structure allowed by statute. Owners are known as members and each has limited personal liability when it relates to the debts and actions from the decisions made by the business. One role of a LLC is the advantages it offers to members. Any person pursuing to become a business owner or become a part of a business should have a full, or at least a good understanding of the business structure. As with any type of investment there are risks, including advantages as well as disadvantages. In addition to the limited personal liability members also have the benefit of pass-through taxation. This taxation is one of the advantages of LLC because members can report losses or profits on their individual tax returns and avoid double taxation. Gitman (2009, p. 7), states there are strengths in a LLC member such as each member cannot lose more than they have invested in the business, and financing is more accessible. There is no limit to the number of members who can be a part of a LLC entity. Some of the disadvantages of being a member of a LLC is the
FIN419 - Finance for Decision Making
Date
Instructor’s name
Limited Liability Corporation and Partnership Paper
Limited Liability Corporation and limited liability partnership are two of several types of structures that individuals can give thought to forming when starting a business. To form a corporation each member has limited liability, but the corporation has full liability. Forming a partnership requires at least two people, which are called partners, and each partner has limited liability. This paper will describe the roles of Limited Liability Corporation (LLC) and Limited Liability Partnership (LLP). In addition, the paper will describe under what circumstance one would choose one instead of the other.
Limited Liability Corporation According to IRS.gov (Internal Revenue Service, 2011, para. 1), Limited Liability Corporation is a business structure allowed by statute. Owners are known as members and each has limited personal liability when it relates to the debts and actions from the decisions made by the business. One role of a LLC is the advantages it offers to members. Any person pursuing to become a business owner or become a part of a business should have a full, or at least a good understanding of the business structure. As with any type of investment there are risks, including advantages as well as disadvantages. In addition to the limited personal liability members also have the benefit of pass-through taxation. This taxation is one of the advantages of LLC because members can report losses or profits on their individual tax returns and avoid double taxation. Gitman (2009, p. 7), states there are strengths in a LLC member such as each member cannot lose more than they have invested in the business, and financing is more accessible. There is no limit to the number of members who can be a part of a LLC entity. Some of the disadvantages of being a member of a LLC is the
References: Gitman, L. (2009). Principles of Managerial Finance (12th ed.). Boston: Pearson, Addison Wesley. Internal Revenue Service. (2011). Businesses. Retrieved from http://www.irs.gov/businesses/small/article/0,,id=98277,00.html