...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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...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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...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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...Limited Liability Corporation and Partnerships FIN/419 December 19th, 2011 James Hagist There are multiple legal forms of business, each developed and selected by business owners depending on the needs of that business. Each legal form of a business has specific ownership and taxation laws and regulations that assist business owners in making the decision on which selection to make. Among the three most common legal forms of business are partnership and corporation. This paper intends to explain the roles of limited liability corporations and limited liability partnerships. A corporation is a business that has been given rights that an individual has by the government. Limited liability corporations are companies that limit the liability of its participants by the assets in which they contributed to the organization. This means that the business can be sued by an individual or another business and can lose its gained assets. Although a limited liability corporation and its individuals can be sued, the limited liability portion ensures that an individual cannot lose more than they have invested in the company. A Limited liability corporation provides its owners with the opportunity to partake in limited liabilities and taxation like partnerships can. This type of business is good for business ventures involving two people. Owners of a limited liability corporation are called members. Members often include...
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...Task 1 Part A SOLE PROPRIETORSHIP: • LIABILITY –From a legal point of view there is no distinction between the assets of the business owner and the business itself. Business assets can be used to pay personal debts and personal assets can be used to pay business debts as sole proprietorships are subject to unlimited liability. • INCOME TAXES – All income generated through sole proprietorships is considered ordinary personal income tax to the owner and is subject to the highest rate of taxation by the Internal Revenue Service. • LONGEVITY/CONTINUITY – Because the business owner and the business are the same legal entity, the business will dissolve upon the death of the owner. However, it is possible to sell or give the business to someone else. • CONTROL – Since there can be no business partners in a sole proprietorship, all control of business decisions rests with the owner. • PROFIT RETENTION – All profits generated from a sole proprietorship are income for to the business owner after all the business debts and obligations are satisfied. • LOCATION – There are no legal requirements to start a sole proprietorship on a federal level however each state has different requirements for filing for licenses and permits. • CONVENIENCE/BURDEN – The convenience of having a sole proprietorship is that the owner has full control of the business in every way. The main problem with sole proprietorships is that they...
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...LIT Task 310.1.2-01-06 Part A 1. Sole Proprietorship – the simplest form business. The business is owned and operated by one person and there is no legal distinction between the business and its owner. The owner of a sole proprietorship assumes all responsibilities, liabilities and profit of the business. • Liability- One major disadvantage of a sole proprietorship is the liability. As a sole proprietorship both the owner and business are one and the same and therefore both are subject to any unpaid debt. If the business has debt that is unpaid then the owner has the same unpaid debt and creditors could go after the individual. The same for if the owner has debts separate from the business the creditors could go after the business. As a sole proprietorship business, liability insurance could be purchased to help abate the liablity. • Income Taxes- As a sole proprietorship business, there is no double taxation as associated with a C-corporation. A sole proprietorship business deducts business expenses on a Schedule C of their personal Taxes. A disadvantage of a sole proprietorship is you will be taxed on total profits of the business and be subject to self-employment tax. • Longevity/Continuity- The longevity of a sole proprietorship business is the life span of its owner. If the owner dies without selling or passing the business on to a relative the business no longer exists. • Control- An advantage of the sole proprietorship is that the...
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...cases this type of business can be operated out of the owner’s home. All business decisions are made by the owner, therefore he or she is entirely responsible for the operations, financial and legal aspects of the business. Some disadvantage to a sole proprietorship would be. The owner has unlimited liability and his personal wealth and assets are at risk to claims against the business. Another would be that raising capital is difficult for a sole proprietorship and is usually limited to the owner’s personal funds or credit available based on his personal credit history. Another key point to a sole proprietorship is that the business is not required to file or pay taxes. The sole proprietorship is a tax reporting entity, not a tax paying entity so the business taxes are filed at the personal rate of the owner on his personal income taxes. Business Services Sole proprietorship (May 20, 2008). Retrieved on (March 9, 2010) from Iowa Secretary of State. http://www.sos.state.ia.us/business/sole.html Key Characteristics • • • • The owner is completely and solely responsible for all liabilities of the business including debts and actions against the company. He has unlimited personal liability. Taxes are reported with the owner’s individual income tax return. The business lacks longevity because it is not a separate legal entity and usually ends with the...
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...business owners. A business owner and a sole proprietor may operate under different names, but legally, they are the same entity. Which leads to one of the biggest disadvantages of becoming a sole proprietor; the owner is responsible for all debts and fault created by the business. One of the major advantages to starting a sole proprietorship is the simplicity behind the formation. There is very little paperwork that needs to be filed at the inception and it takes very little work to keep the business compliant with state and federal laws. Another advantage to a sole proprietorship is taxes. Any money made by a sole proprietor is considered income to the owner. The profit is claimed as income on the owner’s annual tax filings. * Liability: Because there is no legal separation between an owner and the business in a sole proprietorship, the business owner is unlimitedly liable for any debt or fault of the business. Even if the sole proprietorship dissolves, the owner will be liable for the debt. If the debt is not taken care of in a timely manner it will could affect the owner’s credit rating and lead to future earnings being garnished. * Income Taxes: Taxation of a sole proprietorship happens once, at the income level of the owner. Any profit made by the company is considered an income to the owner. A sole proprietor is considered by the internal revenue service as self-employed, meaning the sole proprietor will not be held liable for FICA taxes. However, as the...
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...Limited Liability Corporation, Limited Liability Partnership, Corporation Paper Angelika Evanoff FIN/419 July 20, 2015 Mrs. Michele Huss Limited Liability Corporation, Limited Liability Partnership, Corporation Paper The purpose of this paper is to discuss three legal forms of business organization; a limited liability corporation or company, a limited liability partnership, and a class C corporation. The paper begins with a brief description of each structure, followed by a comparison and contrast of each form’s advantages and disadvantages. The author finishes by citing examples in which she would use each type of business structure if establishing a new business. It is important to choose the appropriate legal form of organization because the decision affects owner’s risks, raising money, and how profits are taxed (Gitman & Zutter, 2014). Readers can expect to have a better idea of the various options available to entrepreneurs after reading this essay. Legal Forms of Business Organization The three most popular structures of company organization are the sole proprietorship, the partnership, and the corporation. A sole proprietorship has one owner while a partnership has two or more owners, and a corporation is an entity created by law (Gitman & Zutter, 2014). The forms offer limited liability or unlimited liability to its owners. Various structures that provide limited liability include a limited liability corporation, limited liability partnership, and a...
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...Proprietorships, Partnerships, and Corporations. However, each of these forms can have variations and a hybrid called a limited liability company can be formed in all US States that exhibit the characteristics of both a partnership and a corporation (American College, n.d.). The following are some of the forms of business existing in the United States and their characteristics: a. Sole proprietorship b. General partnership c. Limited partnership d. C-corporation e. S-corporation f. Limited Liability Company This report contains an overview of some of the forms of business organizations that exist in the United States. Because of the federal system of the U.S., the many forms of business organizations are subject to the laws and regulations of the state where they operate or are registered. Both federal and state taxes are also taken into account by business owners and financial advisors in the choice of the business form (Perez, 2009). Liability, tax consequences, and legal implications are generally the most important actors business owners consider when choosing a business form. a) Sole Proprietorship The most basic of the forms of business organization is the sole proprietorship where the business is owned by a single person. There are more registered sole proprietorships in the U.S. than the other forms of business. In addition, many big businesses have started out as sole proprietorships (Jordan, 2008). Liability: The owner...
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...in the business’ taxation procedure. The tax liability one is responsible for depends greatly upon the election of a particular entity whether it is a Limited Liability Partnership, Limited Partnership, Limited Liability Company, S corporation, C Corporation, or a Business Trust. Within each of the different organized entities federal law has provided each organization with separate and distinct procedures in accounting for its assets in relation to its tax liability (Drucker, 1989). Limited Liability Partnership A limited liability partnership more commonly known as a LLP engenders aspects of both partnerships and corporations, two entities that will later be explored in greater detail. One should elect to enter into a limited liability partnership if investors wish to partake in the management of the business. Just as in a partnership or limited liability company, the profits of a LLP are dispersed among the partners for tax purposes, ultimately avoiding the problem of “double taxation” which is often exhibited in corporations. Similar to that of the shareholders of a corporation all partners in a LLP have a form of limited liability, however contrary to corporations partners actually possess the authority to manage the business directly. In the state of Texas a partner is not individually liable for debts and obligations of the partnership incurred while the partnership is a registered limited liability partnership. The...
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...form a general partnership. The general partnership has the most potential liability for all of then out of the three options. A partnership is not treated as a separate legal entity, therefore all of the owners would have unlimited liability, even Norm the friend who won't even be there. This means that all the assets that they all invested and their personal assets would be liable if creditors came after them or if they were sued by someone. Also another downside for Norm is that partners are all agents for each other. This means that anytime one of the other partners makes a decision concerning the business, Norm has been bound to that contract. So even though he will not be anywhere near the new business, any decisions made by the people there will make Norm liable to any adverse consequences. Another reason Norm wouldn't want this as an option is that all owners share joint and several liability for all debts. This means that a third party can sue all of the partners or just him for any decision that Laverne or Shirley made that brought the action. Norm would not even have to know about it. The general partnership benefits in ease of debt financing because of this kind of liability. Since all of the owners have unlimited liability, if one of the partners defaults on the loan, banks can go after not only the partnership, but each owner as well. However, it is harder for a general partnership to raise equity financing due to the unlimited liability. It is going...
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...organizations is the limited liability partnerships and limited liability corporations. Limited Liability Partnerships A limited liability partnership, commonly abbreviated as an LLP is a business organization made up of partners. However, a limited liability partnership has the characteristic number of partners who have limited liabilities. According to Boone and Kurtz (2011), these specific partners are not therefore liable for the financial responsibilities of the partnership. This is the feature that introduces the unique role of the limited liability partnerships as business organizations that protect the personal estates of the limited liability partners. Another role of the limited liability partnerships is to generate financial value to the partners with limited liability partners. It is the responsibility of every business to generate business value to the owners and other stakeholders. The business value involves generation of profits for the active partners and the limited liability partners (Boone & Kurtz, 2011). According to Pride et al (2011), the owners of the limited liability partnerships are not personally liable for the debts or financial obligations of the business. Therefore, the limited liability partnerships have a critical role of generating business value that can be able to pay off the business obligations. This will leave the owner of the business unit from the burden of holding a failing business. Limited Liability Corporations A limited...
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...business organization such as: * Liability: who is responsible and are there limits to liability? * Income taxes: how are taxes paid? * Longevity or continuity of the organization: how to or what dissolves an organization? * Profit retention: how is profit divided? * Location (expansion): how are location or expansion decisions made? * Convenience or burden (compliance): how difficult is it to comply with regulatory requirements? Sole proprietorship Sole proprietorships are easy to form, and are owned by a single owner. The owner is responsible for all decisions, contracts, debt, and liability. * Liability: owner is personally liable for all liability, personal liability is not protected. * Income taxes: owner reports all profit as personal income, and pays taxes as personal income. * Longevity: sole proprietorships are terminated by selling off assets or death of owner. * Control: owner makes all final decisions. * Location (expansion): may move or expand at owner’s discretion. * Convenience or burden: owner is solely responsible to comply with all regulatory compliance. Sole Proprietorship advantages * Easy to form * Owner makes all decisions * Profits taxed only once Sole Proprietorship disadvantages * Owner is liable for all debts * Owner faces unlimited liability * Difficult to raise capital General partnership General partnerships are a form of business where 2 or...
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...requirements of the business, the flexibility of management decisions, government restrictions, personal liability, tax considerations, and the like” (Cheeseman, 2010, p. 529). The major forms of business organizations are, sole proprietorship, partnership, limited liability company, limited liability partnership, corporation, S corporation, and franchise. This paper will define these forms and provide individual scenarios of each and why they were chosen. Sole Proprietorship “A sole proprietorship is the simplest form of business organization. The owner of the business, the sole proprietor, is the business” (Cheeseman, 2010, pg. 530). An example of a business that would benefit from sole proprietorship would be someone who creates floral designs and sells them for a profit. In this scenario, sole proprietorship would be the optimum business form as it is the easiest business to establish and does not cost a lot. As the sole proprietor, the owner has the rights to make all business decisions, to include staffing, merchandise pricing, and hours of business. Additionally, the owner would own all the business, have the right to all the profits, would not pay taxes at the business level, and has the ability to sell the business at any time. Partnership A partnership that involves two or more partners can either be a limited partnership or a general partnership. A general partnership is a type of business that involves two or more...
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