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Fin-419 Week 1 Paper

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Running Head: LIMITED LIABILITY CORPORATION AND PARTNERSHIP PAPER

Limited Liability Corporation and Partnership Paper
A.J. Smith
FIN-419/Finance for Decision Making
December 9, 2013

Limited Liability Corporations and Partnerships
Introduction
Legal forms of business organization are important aspects of financial management. Ownership structure, articles of organization, legal rights and liabilities of members, and other features of a business organization ultimately affect financial management decisions. The three most common legal forms of business organization are the sole proprietorship, the partnership, and the corporation. The share of corporations and partnerships in the overall economy becomes ever larger. In this paper, limited liability corporations and partnerships are analyzed with respect to their comparative advantages and disadvantages.
Limited Liability Corporation Limited liability corporation (LLC) is one of the organizational forms that provide owners with limited liability. The LLC is permitted in most US states and gives its owners limited liability and taxation as a partnership. LLCs work well for corporate joint ventures or projects developed through a subsidiary (Gitman, 2009, p. 8). According to Bagley (1994), the LLC “is a statutory business entity that fits between the corporation and the partnership.” Basically, the LLC can be said to fill the business need recognized, but not satisfied, by the S corporation and the limited partnership. As for its main features, the LLC gives the owners limited liability and taxation partnership. The LLC offers three fundamental advantages. The first advantage is the pass-through tax treatment. In other words, there is no double taxation in the case of an LLC. The second advantage is the ability of members to deduce business losses on their personal tax return. The third advantage is about

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