...A partnership is considered to be a legal relationship between two or more persons who carry on a business with the objective of making a profit and sharing it between or among themselves; however, the persons are equally liable for its debts. A Limited Liability Partnership (LLP) is a form of partnership that protects its members from being personally liable for negligent acts conducted by other partners or employees under their supervision. It is a popular business structure given that the partnership is not taxed and the onus is on each partner to file individual tax returns. However, a LLP is primarily designed for professionals for example lawyers, doctors, engineers and accountants. Based on the definition of a LLP and the information presented in the case, one has to question whether the form of partnership intended among Kobe, Dwayne and Lebron was the most suitable for the manufacturing and marketing of sports merchandise. Powerade V KDL, LLP Powerade will indicate that an exclusive agreement to only use and display Powerade products was formed with KDL through their partner Dwayne. Irrespective of KDL’s internal challenges or communication issues, the contract was breached as Kobe on behalf KDL also entered in an exclusive relationship with Gatorade which severed the exclusive arrangement established with Powerade. Given that Gatorade is a competitor, Powerade will be concerned that information regarding their operations could be paased on to Gatorade and...
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...business structure is required to enhance and expand business opportunities for entrepreneurs and professionals, a new form of partnership. Based on S.3(1) of Partnership Act 1961 (PA 1961), partnership is the relation which subsists between persons carrying on business in common with a view of profit. Partnership offers flexibility where its members are allowed to agree or disagree upon its arrangements. The traditional partnerships found in Malaysia are the limited partnership and the general partnership. In general partnerships, partners have unlimited liability towards the debts of the company. Unlimited liability is defined as the situation where the personal assets of the partnership's members are vulnerable since there is no legal separation between the owners and the business. Hence, the partners’ personal assets can be seized to pay the debts of their company when the company’s assets are insufficient. A general partnership cannot file bankruptcy when it possessed excessive debts, which means that the individual partners will each have to file bankruptcy to get relief from the debts. Hence, partners will try to avoid risks and it restricts the expansion and growth of the business. Others change their legal status to secure limited liability when they possess extensive personal assets that they would like to protect. A general partnership cannot perform some actions whereby an individual or a company can. It cannot make contracts, sue or be sued, hold property or...
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...Limited Liability Corporation and Partnership Jacob Sanchez FIN-419 December 22, 2014 Michele Huss Limited Liability Corporation and Partnership Introduction Many people attempt to start businesses annually and need a little guidance on what their best choices are for forming the blueprint of their future endeavors. Limited Liability Corporations and Partnerships are a couple choices that can be chosen by some entrepreneurs. They have some things in common, and also have distinct differences. This paper will discuss how each type of business entity is formed, the tax benefits, some advantages and disadvantages. Lastly, these things will be evaluated to determine under what circumstances one should be chosen over the other. Limited Liability Corporation A Limited Liability Corporation, from now on an LLC, is a less complex formation of a corporation. It is formed by filling an articles of organization with the states Secretary of State office. This article will include the business name, the members, and in some states an operating agreement. (U.S. Small Business Administration, n.d.) In an LLC with more than one member an operating agreement is ideal, for structure and regulation. In most instances it will provide a roadmap of rights, arrangements, and profit sharing and loss. (U.S. Small Business Administration, n.d.) Taxation is an important aspect of forming a business, an LLC has many choices for taxation. An LLC can opt to file as a corporation, in which...
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...Limited Liability Corporation and Partnership Paper K. Smith FIN/419 June 2, 2014 The thought of running your own business can be very overwhelming. There are many things to be considered when starting a business. It involves writing a business plan, choosing a location, knowing whether to get a loan or start the business with another individuals. Knowing whether or not you will start the business as an individual or with a partner will help with the next question. How will you structure the business? In this paper I will discuss the roles of the Limited Liability Company (LLC) and the Limited Liability Partnership (LLP). I will also include my opinion as to why I would choose an LLC or an LLP if I was starting a new business. A limited liability company (LLC) is an entity in itself somewhat like a corporation; an LLC can conduct business, open a bank account and obtain a tax identification number. Owners of an LLC can choose to run the business themselves or hire someone for the day-to-day affairs of the business. An LLC can have one to several members including corporations as members (Paul, 2011). The owners of an LLC have limited liability meaning they are not liable for the debts and liabilities of the company. Creditors cannot hold the owners of an LLC responsible for payment from their personal assets if the assets of the company are not enough to pay a debt. The LLP must have one person responsible for the legalities of the company not including silent partners...
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...Limited Liability Corporation and Partnership Paper University of Phoenix FIN/419 November 26, 2012 Every business has a basic idea of the entity in which to establish. Capitalization and protection is the main focus to establish the business with a question of which type of entity should a business use to move forward. Businesses have a host of factors when making this decision, the most common forms of these entities are, partnership, corporation, sole proprietorship, and S corporation. A Limited Liability Company (LLC) is a business structure allowed by the different state statutes. The following will list two of these entities and the business entity which I would choose. Limited Liability Corporation Limited Liability Corporation has a unique quality of being structured like a regular corporation, and having the attributes of a partnership. In a Limited liability corporation the owners are protected from personal liabilities, which are similar to a corporation, but have the tax advantages of the partnership. This means the creditors of the business may not pursue any of the personal assets of members of the LLC to recover any business debts. Also if a member of the LLC has any personal debt, the creditors may not attempt to recover from the corporation. LLC owners, called "members," can manage their businesses or hire professional managers. In addition, LLCs enjoy a lot of flexibility. For instance, they can have as many members...
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...The Roles of Limited Liability Partnerships and Corporations The majority of large companies which we purchase goods and services from are established as a limited liability corporation, corporation or limited liability partnership. Corporations were established in an effort to protect business owners, and have now turned into many complex variations (ehow). A limited liability company is not a partnership or a corporation, it is a hybrid. The owners of a limited liability company are shielded from the personal liability of the corporation, and all profits and losses pass directly to the owner’s without taxation of the entity. In order to form a limited liability company, the articles of organization must file with the state and pay the associated fees (uslegal, Limited Liability Corporation Law & Legal Definition). A limited liability company is owned by its members. If the limited liability company uses managers, the members will more closely resemble stakeholders as they do not make management decisions. If the LLC does not use managers, then the members will be more like partners as they will have a direct say in the decision making of the company. There can be an unlimited number of owners in an LLC. Limited liability corporations are not required to hold annual meetings and keep minutes as corporations are. An LLC has a limited lifespan, and can be dissolved due to death or withdrawal of a member (uslegal, Limited Liability Corporation Law & Legal Definition)...
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...Partnership Form of Organization Partnership Form of Organization A partnership is an association of two or more persons to carry on as co-owners of a business for profit. Partnerships are sometimes used in small retail, service, or manufacturing companies. Also accountants, lawyers, and doctors find it desirable to form partnerships with other professionals in the field. Characteristics of Partnerships STUDY OBJECTIVE 1 Identify the characteristics of the partnership form of business organization. Partnerships are fairly easy to form. People form partnerships simply by a verbal agreement, or more formally, by written agreement. We explain the principal characteristics of partnerships in the following sections. Association of Individuals A partnership is a legal entity. A partnership can own property (land, buildings, equipment), and can sue or be sued. A partnership also is an accounting entity. Thus, the personal assets, liabilities, and transactions of the partners are excluded from the accounting records of the partnership, just as they are in a proprietorship. The net income of a partnership is not taxed as a separate entity. But, a partnership must file an information tax return showing partnership net income and each partner's share of that net income. Each partner's share is taxable at personal tax rates, regardless of the amount of net income each withdraws from the business during the year. Mutual Agency http://edugen.wiley.com/edugen/courses/crs1663/...
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...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...
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...Accounting for Partnerships Rose Mossman ACC407: Advanced Accounting Professor Emily King June 11, 2012 Accounting for Partnerships There are different types of businesses sole proprietorships, partnerships, limited partnerships, limited liability partnerships, and corporations to name the most common. Along with the different types of partnerships there are also different kinds of accounting procedures that go along with the different types of businesses. Along with the different types of accounting procedures there are also different tax consequences. Partnerships are one of the more sought out type of businesses because of the tax breaks and depending on which type of partnership is formed the liability perks. A partnership begins when two or more people co-own a business and share both the profits and losses. The main contribution that each partner gives to the business is money but there are instances when there are other types of contributions such as ideas, equipment or property. The amount of personal liability that will be distributed to each partner depends on the type of partnership and the stipulations that are stated in the partnership agreement. The first type of a partnership is the general partnership which is as the name states general. The partners in this type of partnership share equal rights and responsibilities within the business. Liabilities are also...
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...proprietorship, partnership, limited liability partnership, limited liability, S Corporation, franchise, and corporate. This paper will discuss each form of business and justify why the corresponding business form is preferred. Sole Proprietorship A designer opens a small store to sell their jewelry and art work. The designer does not want to go into business with anyone. This is example of sole proprietorship. Sole proprietorship is the most popular and least complex form of a business organization. The profits that the sole proprietor made would not have to be shared with anyone. The owner would not have to consult with anyone on what decisions were going to be made for the business. With Sole proprietorship, the rules are not conventional on how to run the business. They could combine the business and personal assets. Partnership Two college buddies decided to open an eye care center after they finished college and training. This is example of general partnership. A partnership is a type of business that two or more people start. They can begin the business with just a hand shake. Generally, partners have a lawyer draw up some type papers explaining everything. With a partnership, there are more than one person contributing his or her finances and skills. They share the responsibilities of the company equally. With taxes in a partnership, the company is not taxed, but each partner is tax on the income he or she made. Limited Liability Partnership ...
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...provides autonomy and ease in creation, but is risky because of unlimited liability. The general partnership, which allows owners the opportunity to do business together, however, it carries the same unlimited liability as the sole proprietorship. The C-corporation provides limited liability for its owners, although, it can be problematic to manage, with numerous requirements and ongoing management. The S-corporation, a corporation similar to C-corporation, however, after meeting the eligibility criteria, the S-corporation can elect to be treated as a partnership for tax purposes. And the limited liability company, which provides the most flexible...
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...business organisation. Introduction Business is an organisation or economic system which is always owned by someone and it can be for- profit as most of the business organisations exist for, or no-profit such as charity or agricultural cooperative. There are many types of business organisations: Sole trader, Partnership, Private Limited Company (Ltd), Public Limited Company (Plc), Co-operatives, Franchises and Public sector. The first three types of business organisations will be highlighted in this report as they are the main types of businesses in Scotland. Identification of the main types of organisations recognised in Scots law Sole trader is a type of business organisation started, owned and run by one person. Other term for sole trader is entrepreneur which refers to the self-employed person who manages the business and is responsible for business’s profits and losses. One of the most important features of sole trader is unlimited liability which means that the owner of the business risks everything he owns such as house, car and even the business. Partnership is organisation where a number of people share the ownership of the business. Partnership is a useful form of organisation for professional type of business such as accountants or lawyers. Each partner is an entrepreneur, that is, part owner and exercises joint control. Profit is shared equally between partners. Pillans Brothers v Pillans (1908) The Pillans brothers were running the business that was...
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...Liability of the members in relation to the obligations of the business organisation Sole proprietorship The sole proprietor and the owner is regarded as the same entity. Therefore, the owner has unlimited liability in relation to the obligations of the business organisation. This would be a disadvantage as the owner’s personal assets are at risk as the owner is personally responsible for all debts and obligations of the business as regarded by law. Partnership Same as above. Limited liability partnership (LLP) The LLP is a separate legal entity whereby LLP’s liabilities are its own. Therefore the partners will not be personally liable for the LLP’s debts and obligations. Limited Partnership LP is not a separate legal entity. However, only the general partner who takes part in the management of the firm is personally liable for debts and obligations of the LP. The limited partner liability is capped at the amount of the agreed investment in LP and his other assets would not be at risks. It should be noted that the limited partner should not take part in the management of the firm otherwise he would be considered a general partner and his liability will be unlimited. Company The company is considered as a separate legal entity and the company’s assets are its own. The company’s liabilities are also its own and the shareholders and directors of the company are not personally liable. This is also exemplified in the case of Saloman v A Salomon & Co Ltd...
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...LIT1 Task 310.1.2-01-06 Part A: 1. Sole Proprietorship: a. Liability: The owner of sole proprietorship is responsible for all bills that involve the business from supplies to employees. Owner personal’s assets are attainable by creditors in case the sole proprietorship is unable to cover for the bills. b. Income Taxes: The owner would be considers as ordinary person income in which they are tax heavily. Sole proprietorship is unable to take advantage of the lower income tax rate. c. Longevity/Continuity: It is impossible for sole proprietorship to continue because once sole proprietorship is no longer alive the business will no longer exist. d. Control: The sole proprietorship is control of the business. For example the sole proprietorship set his/her schedule (opening and closing) of business. e. Profit Retention: Sole proprietorship retains on the profit from the business. He/She is able to do whatever with the profits. f. Location: The sole proprietorship chooses where the business will be run at. g. Convenience/Burden: The convenience of being a sole proprietorship is being able to control business. The burden of being a sole proprietorship is being responsible for all aspect of the business from liability to income taxes. 2. General partnership: h. Liability: General partnership is still responsible for all debts and obligations. Evan if one of the partner has misuse the...
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...Four categories of business enterprises are as follows: • Partnership A partnership is an agreement between two or more people to finance and operate a business for profit. Partnerships are relatively easy to establish; however time should be invested in developing the partnership agreement. A partnership agreement is a legal agreement between partners in a partnership which sets out the terms and conditions of the relationship between the partners, including: Percentages of ownership and distribution of profits and losses Description of management powers and duties of each partner Term (length) of the partnership How the partnership can be terminated How a partner can buy his/her share of the partnership. A partnership agreement should be prepared by an attorney so as to include all important "what if" questions and avoid problems when the partnership ends. TYPES OF PARTNERSHIP There are two types of partnership; general and limited partnerships. THE GENERAL PARTNERSHIP A general partnership is a type of business partnership arrangement that involves the participation of two or more parties as business partners in a company organization. With this particular type of business arrangement, all partners share both the rewards and the potential liabilities associated with the operation of the company. Unlike other business types, a general partnership does not provide any type of limited liability for any of the partners, meaning that in the event of some...
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