Roles of Limited Liability Corporations and Partnershipsroles of Limited Liability Corporations and Partnerships

854 Words Mar 28th, 2011 4 Pages
Roles of Limited Liability Corporations and Partnerships
Martin M. Komertz
FIN 419
3/21/2011
John Wetherington

Roles of Limited Liability Corporations and Partnerships

In the following paper, I will look to identify the roles and differences between Limited Liability Corporations and Partnerships. Each has different advantages and disadvantages than the other. I will look to break down each and then identify which method of ownership would be the preferred method from an individual responsibility standpoint. Having stake or being invested into a company is important to know what you rights are and what you as an owner are responsible, liable for, and or entitled to. It is important to understand these things so the best
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A Partnership is generally unincorporated, and must have at least one general partner who assumes unlimited liability for the business. Partnerships must have at least two shareholders. Partnerships distribute all profits and losses to their shareholders without regard for any profits retained by the business for cash flow purposes. Limited Liability Companies are taxed as general partnerships unless they are identified as a corporation. Based on the information provided, the best opportunity presents itself through a sole proprietorship. An investor or independent contractor can come in and make their contribution to the company, make their money and yet be left with zero liability in the company and their debts. There is no obligation to pay into or be liable for any amount of money outside of current contractual agreements from doing day-to-day business. Corporations share the liability load and the investors, stakeholders are end up responsible for a portion of the debt assumed. General Partnerships open the owners up to being personally liable in the event the company collapses. A general partnership could put the liability onto one owner with unlimited liability. It depends on the business type for what LLC is to be chosen. I believe for a business in which services and goods can be contracted out, a sole proprietorship would work best, however corporations, for companies with over 5,000

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