Limited Liability Corporation and Limited Liability Partnership Essays

Limited Liability Corporation and Limited Liability Partnership Essays Limited Liability Corporation and Limited Liability Partnership Corporation Paper 10/11/2015 There are many different organizations to choose from when starting a business. Amongst the many different choices there are partnerships and limited liability corporations. A partnership consists of at least two people and each person possesses limited liability; and with a corporation, each person possesses limited liability, but the corporation has full liability. Here, the roles of partnerships and limited liability corporations will be explained. Also, under what circumstances in which a limited liability corporation or partnership is chosen over the other will be stablished. A limited liability corporation is defined as 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 (Internal Revenue Service, 2010, para. 1). LLC members are not limited as to the number of corporations they may take part; however, they are limited as to the percentage of interest in other corporations (Gitman, 2006). Limited Liability Corporation has a distinctive quality of being organized like an ordinary corporation, and possessing the qualities of a partnership. In a Limited liability corporation, the owners are sheltered from personal liabilities, which possess similarities to a corporation, but have the tax benefits of the partnership. This means the business creditors may not pursue possession of any of the personal assets of members apart of the LLC to mend any business debts. Also if a member of the LLC has any personal debt, the creditors may not attempt to mend any debts from the corporation. LLC owners, also called "members," have the choice of managing their businesses or hiring professional managers. In addition, LLCs benefit from a substantial amount of flexibility. For example, they can have as many members as they like, and corporations are allowed to be members. LLCs are granted freedom from the state-mandated membership and management reporting requirements that corporations have. Most importantly, LLCs do not have to pay taxes. Instead, their earnings and losses are distributed through to the tax returns of their members just like a partnership would. Limited Liability Partnership is another name for a limited liability company, often used by professional associations (InvestorWords, 2011). The liability of the investor or partner is limited to the amount of money they have invested in the company. This arrangement usually prevents each partner from being held accountable for the misconducts of another partner. Limited liability partnership can be utilized in many different fields, but is most frequently used in law or accounting firms. The laws regarding a LLP vary significantly from state to state, and between countries. A limited liability partnership is a business structure intended for partners who want the same amount of say in managing their business, but not an equivalent share of the liability. Any partner apart of a LLP is not responsible for the debts or liabilities of the other partners involved. This makes the LLP appealing for professional service organizations such as accounting, architecture, or law firms. Business owners are faced with many hard decisions, like what business structure to use in the formation of their company. Opening a business as a limited liability corporation would be the ideal choice because the LLC gives partners more advantages with fewer restrictions. There can be as many investors as one wishes and these investors, or members, can also have as many members as they want, so on and so forth. Opening a business is taking a chance and taking a chance with the LLC has less risk. A LLC offers company owners and investors protection from any discrepancies or any indiscretions that the partner may have gotten involved in. A LLP allows owners and investors to be responsible for what they put into the business. Although both the LLP and LLC were created to help business owners and investors protect their businesses and both are beneficial, the LLP is the best business choice. If there is a need to include any other partner for the running of a business, a LLP is a better alternative. References Business Dictionary.com (2011). WebFinance, Inc BusinessDictionary.com. Retrieved from businessdictionary.com/definition/visionstatement.html Gitman, L. J., & Zutter, C. J. (2015). Principles of Managerial