Limited Liability Corporation and Partnership Paper Jay Wainwright FIN/419 April 27, 2012 Jennifer Stapp

Limited Liability Corporation and Partnership Paper

Limited Liability Corporation and Partnership Paper An average person would not understand or know the roles of limited liability corporations and/or partnerships. This paper will discuss the roles of limited liability corporations and partnerships. To further the understanding of limited liability corporations and partnerships this paper will discuss under which circumstances one should be chosen instead of the other. A choice of this magnitude can only be decided upon with the type of business a person chooses. As everything else in this world limited liability corporations and partnerships have their advantages and their disadvantages, which will also be discussed in this paper for more clarity. Limited Liability Corporation (LLC) A limited liability corporation (LLC) is acceptable in most of the United States, the LLC bestows to its owners, taxation and limited liability as a partnership. An LLC can possess 80% plus of another corporation, and partnerships, corporations, or shares of an LLC can be possessed by non-U.S. residents. Almost everything in this world has its advantages and disadvantages, so choosing which kind of legal form of business organization is no different. An LLC has its advantages such as accomplishing extensive size by the selling of ownership (stock), the ownership (stock) is promptly transferable, and they have advanced access to financing. With advantages come disadvantages such as the higher taxes, because any corporate income is liable for to be taxed, and taxed at a maximum of 15% rate for dividends liquidated to the shareholders, contingent to more regulation from the government, organizing this type of business is more expensive than other legal forms of business organizations, and the owners must receive reports of the financial status, thus the lack of secrecy is gone.

Limited Liability Corporation and Partnership Paper

Limited Liability Partnership (LLP) A limited liability partnership (LLP) is acceptable in much of the United States; but administrative regulations vary by state. Limited liability bestowed upon all LLP partners. In an LLP any acts of malpractice placed upon those partners or partner responsible, but all partners are not held responsible for the acts of other partners each partner is held responsible for their own choices of malpractice. When it comes to taxation for an LLP the whole LLP is taxed together as a partnership. An LLP has advantages and disadvantages just like everything else in this world. Some of those advantages for an LLP are their capital attainment effectiveness is intensified because there is more owners involved, and their capable of more research and inventions because of the multiple brains at work and more brains with managerial skills. Some of those disadvantages are that the partners could be liable for other partners debts with their unlimited liability, partnerships is liable to sever if a partner or partners die, and partnerships are hard to discharge or delegate. One Instead of the Other Under different circumstances an LLC is appropriate and under other circumstances an LLP is appropriate. If my company were to go public in the long-term choosing an LLC would be more ideal. An LLC would be more ideal because growth is a necessity and in the future when its time for a change or something of that nature selling the business for millions of dollars to a bigger company is worth it. A choice of operation would be to expand internationally so an LLC is more ideal than an LLP, which cannot expand globally unless converted into an LLC. If my company wanted to hold rental property, an LLC is an excellent choice for such an objective.

Limited Liability Corporation and Partnership Paper

Conclusion Like purchasing a house is a major life decision so is opening up a business and choosing the type of entity it will be. The choices vary between governing statues, the tax codes, and so on has to be considered before making a final decision. This paper has discussed briefly the roles of limited liability corporations and partnerships. The advantages and disadvantages of both LLCs and LLPs are reviewed in this paper to give more clarity on which entity a person should choose. As stated earlier, depending on the type of business and the future goals of the business should a legal form of business organization be chosen.