Pros of Limited Liability
• Limited liability: This means that the owners and shareholders personal property are protected when the LLC is bankrupt or sued. Also, in some cases of fraud and illegal acts the courts will pierce the corporate veil that protects the member or members so that they become personally liable for such acts. However, it was said that since there are little to no precedent in this area of such law it is difficult to determine under which circumstance the veil would be removed.
• Unlimited amount of members- You must have more than one owner otherwise you can be taxed as a sole proprietor. Members do not necessarily need to be citizens of the country and can an owner that is another owner of another LLC. Also, LLC are not required to have a board of directors or shareholder meetings, less paperwork and record
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• Lack of case law: The LLCs are a new concept of a business structure so, there are much case law that exist and it is very important for predictability. For example, if you know a court ruled in a certain way you can act accordingly to protect yourself, but since there are few cases laws there is more vulnerability that can cause you a great amount of liability.
• Transfer fees: Share transfers for LLCs that are not listening on the Stock Exchange of Trinidad and Tobago attract Stamp duty payable to the Board of Inland Revenue on an ad valorem basis at the rate of $5.00 per $1000. A fixed stamp duty of $25.00 is paid on transfer to a nominee. Consequently, shares listed on the Stock Exchange can be transfer without being liable to stamp duty unless they do not follow the rules of the exchange, and they would have to pay event duty which is 5% of the market value of the
Liability: Investors have limited liability. This protects investors from having litigation brought against them. If the investor is a managing partner, however they then could have their personal assets and property employed to satisfy any debt the S Corp has accrued.
Corporation – “A business organization that exists as a legal entity and provides limited liability to its owners.” (Longenecker, Petty, Palich, Hoy, Pg. 205) The main advantage of a corporation is that the business liability falls onto this entity instead of the individuals that own it. The disadvantages of this organization are found mostly in its formation. A corporation is expensive to create and requires compliance with state
Capital is a major factor for decision making. Since the business involves a group then the three forms of business exposes the group to a greater capital availability. The liability of members is also an important factor. The partnership offers unlimited liability to the members of the partnership while the corporation and Limited Liability Company allows the members limited liability and thus their personal assets cannot be interfered with in the event of a liability. The decision making process is for the business associations but the input of all members results to the making of good and informed decisions. Finally, the taxation practices for various forms of associations informs the decision. Corporations are often taxed twice whereas the LLC and partnership business is taxed
The limited partner only risks what they invested in the business. The downside is if the limited partner becomes active then they could potentially lose personal assets. The S corporation is a more favorable tax option on income. The disadvantage is there is certain requirement that must be met. The LLC is a great option. With this type, the risk is only what is invested unlike sole proprietorship. It is easy to set up, and has tax advantages. The downside is if a corporation wanted to switch to C, it would have to pay additional taxes. I do believe the option they picked is best for them at that time. C has tax advantages. If they started with LLC and later wanted to change, it would cost them. C is a great way to get capital as well.
Limited Liability. When it comes to taking responsibility for business debts and actions of a corporation, shareholders’ personal assets are protected. Shareholders can generally only be held accountable for their investment in stock of the company.
LLCs must typically pay more fees to file as LLCs compared to some other business entities or sole proprietorships. Additionally, many states require yearly renewal fees. However, these fees are usually less than what some other corporations have to pay. Because of the protections afforded to LLCs, some types of businesses are ineligible to file as LLCs. Banks, insurance companies, and medical service companies are examples of businesses that can not be a LLC. Another big disadvantage is taxes. Although LLC’s allow owners to avoid federal taxes, you may actually end up paying more than it would with a different corporation, depending upon the nature of the business. Working with an accountant and/or tax lawyer is a really good idea when planning your business and forming your LLC but can also be quite expensive. The LLC business form is a relatively new concept. As a result, not a lot of cases have been decided surrounding LLCs. Case law is important because of predictability. If you know a court has ruled a certain way, you can act in a specific way to protect yourself. But if not many laws have been established yet, there is a certain vulnerability with your corporations that could expose you to greater
Being the owner of LSU, Joe probably operates as a sole proprietor. It is recommended that the business change its entity selection to limited liability company (LLC). The main advantages to an LLC are the protection the LLC owners receive from business creditors, and the fact that the owners can still participate in the management of the business.
Limited partnerships, like The Book Nook, hold several advantages, especially for limited partners, like Ben and Bob. The main advantage for limited partners is that their personal liability for business debts is limited. A limited partner can only be held personally responsible up to the amount he or she invested. Limited partners enjoy a protected investment, knowing they cannot lose more money than they've contributed.
The core company types offered nowadays is a sole proprietorship, partnership, limited liability company (LLC), and corporations. A sole proprietorship is a company with a singular proprietor that makes all key decisions for the company. A characteristic of a sole proprietorship is that owner is responsible for each and every liability of the company, and the company ceases to exist upon the death of the companys owner. The proprietor assumes all the hazards of the company, and all private assets are used for collateral, even if they are not used in day to day business activities. A partnership is an arrangement involving two or more parties that merge into one entity to pursue a company endeavor for revenue. Each affiliate contributes cash, assets, workforce, labor aptitudes, and each affiliate splits the revenues and debts of the company. Similarly, each affiliate accepts unrestricted personal accountability for the debts of the business. Limited partnerships reduce the amount of personal accountability each individual assumes for the liabilities of the company founded on the percentage each
The largest being, that if you even want to start one, it requires and ridiculous amount of start-up. Another depressing fact is that corporations can get taxed twice. Once when they make a profit, and then when they split it. Last but not least this option is highly regulated and there is a seemingly endless amount of paperwork involved. On a lighter note, the disadvantages of an LLC are much more feasible. The biggest bummer about owning an LLC is that you have to pay a self-employment tax. But when you think about what the tax is for it makes sense. The other disadvantage is that the shelf life for an LLC is shorter than the other
A partnership is an association of two or more people who typically know and trust each other and therefore come together to set up and carry on a business. The partners have an equal control over the company’s affairs and typically contribute an equal capital amount. Incomes and losses are also equally shared . A trust is an obligation given to an appointed person, the trustee, to hold the assets and property of the business on behalf of the others who are termed as beneficiaries. The trustee could be a company, sole trader, partnership of individual and has the discretion over running and managing the trust including matters such as investments, debt, and income generation. The beneficiaries are all those who receive the income or incur expenses. A limited liability company is a complex business structure whereby it is a separate legal identity, separate from the partners. The company is owned by the shareholders and managed by the directors.
There will be more tax deductions available to you after Forming an LLC. A few of these deductions include benefits like a retirement plan, medical expenses, business trips and client entertainment. The IRS audit rate for an LLC is much lower than that of a sole proprietor. You can own and be employed by an LLC at time same time, eliminating the self-employment return from your list of necessary tax documents.
Companies are enterprises, also the legal person, so companies are business entity. It’s also as the business entity, different with other non-business legal person in sociality, for example: Swansea University and Morrison Hospital. Company as business entity, the distinction with non-business legal person is business is profitable legal person; A company is an artificial person. Once it is incorporated by complying with the prescribed procedure, its come into being and is a separate legal entity from its members and officers. This principle distinguishes a company from a partnership.
It limits the liability to the amount of capital they have invested in the purchase of the LLC’s shares.
6.convenience or burden: When operating a LLC there is no personal liability to the partners or owners.