Limited Liability Corportations and Partnerships

Limited Liability Corporations and Partnerships

Laura Gabbard

University of Phoenix

FIN/419 Finance for Decision Making

Jennifer L. Stapp

May 19, 2008

Limited Liability Corporations and Partnerships

Starting a new business requires many decisions, and much planning. One of the earliest and most important decisions is the form of the business, or the type of business entity. Common forms of business entities include sole proprietorships, limited liability corporations (LLC's), limited liability partnerships (LLP's), public and privately held corporations, and franchises. This paper explains the roles of limited liability partnerships and corporations, and the reasons for choosing one over the other in establishing a new business.

Limited Liability Corporations

A limited liability corporation is a type of business entity in which the business itself is separate from its owners. Often, the limited liability corporation is a sole proprietorship, becoming an LLC offers the owners protection from personal liability while allowing the profits and losses of the business to pass straight to the owners without the LLC being taxed separately.

English: Jolliffe Cork Accountants Jolliffe Cork C...

upright

Business

"There can be an unlimited number of members in an LLC company. The company can be managed directly by its members or the members can designate a manager," (Duermyer, 2008, p. 1). Additionally, the LLC designates a registered agent, who is responsible for receiving legal documents for the LLC. Often the registered agent is the business owner or manager, if the designee is in the same state as the established LLC, (Duermyer, 2008).

LLC's are easier and cheaper to establish than full corporations, and do not require annual meetings of members. LLC's protect their owners in a similar fashion as corporations, but require less paperwork. Unlike a traditional corporation, the LLC does not have shareholders, shareholder decision meetings, or bylaws. A limited liability corporation, "…combines the tax...