Disadvantages Of A Limited Liability Company

Limited liability means it does not exceed the amount invested in a partnership or limited liability company. The limited liability feature is one of the biggest advantages of investing in publicly listed companies. While a shareholder can participate wholly in the growth of a company, his or her liability is restricted to the

Convenience/Burden- Like a general partnership a limited partnership is easily formed and can enjoy pass through-taxation. It can also be easier to get financing with a limited partnership. A downfall of the limited partnership is that the death of a general partner can dissolve the partnership unless a prior agreement has been established.

3    • Control – A major disadvantage of the limited partnership becomes obvious when discussing the actual management of the general partnership. Limited partners have no control of the day-to-day operations of the general partnership. Profit Retention – The limited partner receives an agreed portion of the profits that typically reflects the percentage of the amount that has been invested into the general partnership.   Location – If the general partners expand or move into another state, the burden of regulatory requirements is solely on the general partners and not the limited partners. If the partners plan to move or expand into another state, they simply need to file a new DBA in that state. Convenience / Burden – A

Convenience/Burden: Limited Partnerships have extra requirements placed upon them to comply with state regulatory requirements. They must maintain a registered agent to represent them in the state in which they were formed. They are also required to file an informational report with the IRS of the profits passed to the general partners.

The last business option that will be discussed is the Corporation. A Corporation is “a fictitious legal entity that is created according to statutory requirements” (Cheeseman 478). The biggest advantage of a corporation is the protection of personal assets. Shareholders, directors and officers are typically not liable for the company’s debts and obligations. This is limited to the amount of money they have invested into the corporation. Since the corporation is separate from the owners, transfer of ownership is an easy task. Also corporations are generally taxed at a lower rate than individuals in the United States. A corporation is not as simple to form or maintain as other business formations. Articles of incorporation must be filed with the secretary of state and an organizational meeting must be held to elect a board of directors. A corporation also requires, at the least, an annual report so that creditors that do business with the corporation can determine the creditworthiness of the corporation. Also the corporation is taxed on its profits

A Limited Liability Company (LLC), as the name states, has the ability in keeping your liability limited as a professional owner. This is fundamental in protecting your personal assets by separating them from your business assets. In choosing to run a LLC company, we have agreed that a manager-managed business would be conducive to our field of industry. Although one person will have the authority in overseeing the daily tasks of running the business, all non-managing members will still have an input in all decisions in regards to the enterprise. Contract negotiations and employment are just a few of the joint duties of all members. Running an LLC has many advantages like flexibility, limited liability in business related debts, pass-through taxes, and reliability standing. However, with perks there are always some downfalls, such disadvantages consists of being subjected to self-employment tax or if a member departs the LLC ceases to exist, although an Operating Agreement can reverse this challenge. As you can see, running an LLC has more pros, out weighing the cons of such companies.

Moreover, LLC’s offer many of the advantages of both the closely held forms of business (Sole Proprietorship, Partnerships, and limited partnerships) and those of the corporate forms of business. Most notable; reduced personal liability, relative simplicity to form and reduced regulatory operation burden to the owners. Following are the key reasons that our founding members have chosen to incorporate as an LLC:

In this business formation the business takes on all liability removing any personal liability from all involved partners.

A limited liability company is a hybrid type of legal structure that provides the limited liability features of a corporation and the tax efficiencies and operational flexibility of a partnership. The "owners" of an LLC are referred to as "members." Depending on the state, the members can consist of a single individual (one owner), two or more individuals, corporations, or other LLCs. Unlike shareholders in a corporation, LLCs are not taxed as a separate business entity. Instead, all profits and losses are "passed through" the business to each member of the LLC. LLC members report profits and losses on their personal federal tax returns, just as the owners of a partnership would.

In April 2008, Vermont was the first states that enacted a law allowing for the formation of low-profit limited liability companies. As of July, similar legislation has been adopted in Illinois, Kansas, Louisiana, Maine, Michigan, North Carolina, North Dakota, Rhode Island, Utah, Vermont, and Wyoming and the federal jurisdictions of the Crow Indian Nation of Montana and the Oglala Sioux Tribe. Additionally, legislation has been written in California, Florida, Iowa, Minnesota, Nebraska, Ohio, Texas, Washington, and Wisconsin but has not been introduced yet. (11)

Due to limited liability, company creditors’ interests are not protected . Creditors need to bear the risks inherent when dealing with limited company. Shareholders are discouraged from monitoring and controlling the business due to the benefits of limited liability.

As with any kind of business formation, there will always be, to some extent, negative aspects associated with the creation. To this date there is no perfect form of business entity. When deciding on which entity is best suited for a business, there are many things to be considered. Prior to deciding on a business structure, some major points to be thought about are both the legal and tax ramifications associated with the entity chosen. Another criteria that should be considered are the costs connected with the entity type. These cost include the cost of formation as well as any continuing administrative cost that may be incurred. (“Choose Your Business,” 2011)

The form of ownership that I chose for my business is to be a limited liability corporation or (LLC). One of the reasons that I chose to structure my business as a limited liability corporation is because of the fact that I would have limited liability. Limited liability would limit my personal liability for business actions. For example, if a customer slipped on something and fell and there was not a wet floor sign present at the occurrence of the incident then that customer has the opportunity to file a lawsuit against my company. But, because my company is structured as an LLC. I would only lose what I invested in the company and keep my personal assets.

Some advantages that Microsoft might have are that in general partnerships, each participant is personally responsible for the actions of the company. This includes debts, liabilities and the wrongful acts of other partners. One advantage of a limited liability partnership is the liability protection it affords. This type of partnership structure protects individual partners from personal liability for negligent acts of other partners or employees not under their direct control, states the SBA. In addition, smaller local partners are not personally responsible for company debts or other obligations. This is advantageous for

Firstly, even though there are different types of partnership such as general, limited and limited liability partnership. This three different type has its advantages and disadvantages however we will be mainly focused on general partnership. One advantage of the general partnership is raising capital due to the nature of the business the partners will raise capital to start-up the business. Therefore more partners mean more capital can be put to the business, this allows the business to have more potential for growth and profitability. Another advantage is that a partnership is less complicated to form and run than a company they don’t have legal filing requirements, this means they don’t have to file accounts and documents with Companies House.