Limited Liability Corporation and Limited Liability Partnership

Limited Liability Corporation and Limited Liability Partnership Paper

FIN/419: Finance for Decision Makers

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Limited Liability Corporation and Limited Liability Partnership Paper

Starting a business requires many decisions, one of which is the form of business organization that will be established. Common legal forms of business organizations include sole proprietorships, partnerships, and corporations. Aside from the common forms of business a number of other organizational forms exist that provide owners with limited liability; two of which are limited liability corporation and limited liability partnership. In this paper I will explain the roles of limited liability corporations and limited liability partnerships, and discuss under what circumstances I would choose one instead of the other if I were establishing my own business.

Limited Liability Corporation

A limited liability corporation (LLC) exhibits characteristics of corporations and partnerships.

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A limited liability corporation can be established with one owner. One of the similarities to a corporation is the limited liability corporation is a business entity that operates separate from its owners. A limited liability corporation is usually managed by the managing members. Another similarity is limited liability corporation owners, which are called members, also have limited liability and are not liable beyond their capital contributions. A limited liability corporation may choose to have a board of directors, but are not required to do so. A limited liability corporation is similar to a partnership in that it operates like a partnership, but with an operating agreement instead of a partnership agreement. A limited liability corporation can be taxed as a partnership and pass on taxes to the members, but may choose to be taxed as a corporation, if it is determined to be more advantageous. A limited liability corporation can...