Limited Liability Corporation and Limited Liability Partnership
University of Phoenix
America has been known for many years as the land of opportunity both for Americans as well as foreigners in regards to starting a business. But, as easy as it has become to start a business, it is also important to understand the different options there is when structuring the business. This paper will concentrate on two important structures that can be used when starting a business and those are a limited liability corporation (LLC), and a limited liability partnership (LLP). This ...view middle of the document...
Disadvantages of LLC
Just like many business endeavors have many advantages it is important to understand that there many disadvantages as well. An LLC has a number of disadvantages that can make it unappealing to many people trying to start a business. Although the tax brakes where an advantage listed above, it can also be a disadvantage. The main reason for this is that if it’s chosen to not tax as an LLC then each individual member will be taxed individually and could result in a high amount. Another disadvantage is the fact there is no strict managerial role and it can lead to bad decisions being made that may have negative affects on a company. If a member of an LLC dies or goes bankrupt the LLC has to brake up and the company would have to dismantle.
Limited Liability Partnership
A limited liability partnership (LLP) is a partnership permitted in many states; governing statutes vary by state (Gitman, 2009). All LLP partners have limited liability. They are liable for their own acts of malpractice, but not for those of other partners (Gitman, 2009). With that being the biggest and most famous advantage of an LLP is the limited liability for the actions of other members of the LLP. If one member decides to do something illegal that would normally have affects on the entire company, in an LLP that member would be held liable for his own actions. Another attractive advantage of an LLP is the fact that there is no income tax that needs to be paid.
Disadvantages of LLP
One of the main disadvantages of an LLP is the fact that most states only allow...