Limited Liability Corporation and Partnership Paper 5
Limited Liability Corporation and Partnership Paper
September 8, 2014
Limited liability companies allow you to enjoy the liability protections of a corporation with many of the structural and tax advantages of a partnership (Feigenbaum, n.d.). Many states offer owners the choice between limited liability company and limited liability partnership. Both have distinct similarities but differ in liability disclosure.
A limited liability company is a hybrid type of legal structure that provides the limited liability features of a corporation and the tax efficiencies and operational flexibility of a partnership (Small Business Administration, .n.d). The owners of an LLC are called members which can consist of one owner, two or more owners, and corporations. An LLC does not have to pay taxes. All profits are passed through to each member of the LLC. Each member can claim their profits on their individual tax returns like in a partnership.
As a result, members enjoy the advantages of avoiding the "double taxation" of corporations as well as receiving tax relief from the poor performance of their LLCs (Feigenbaum, n.d.). In an LLC owners can run their own businesses or hire managers to run it. LLC has a tremendous amount of flexibility. They can have as many members as they want and corporations can also become members. Corporations are mandated by the state to have a certain amount of members and management. LLC is free from these state mandates.
A limited liability partnership (LLP) is a partnership in which some or all partners (depending on the jurisdiction) have limited liabilities ("Limited liability partnership," 2008). LLP is similar to an LLC, such as they have the same tax advantages, but they cannot have corporations as owners. In an LLC one owner is not...