Business Formations : The Legal Environment

| A general partnership is comprised of a group of two or more individuals who enter into an agreement to start a business. The partners and the business are legally the same. The partners enter into an agreement called the articles of partnership and are typically equally active in the business and the business’s management, unless otherwise stated in the partnership agreement. All profits and losses are shared by the partners in a joint business venture.

As a hybrid of partnerships and corporations, LLC’s provide limited liability for debts and flexibility to be taxed as a partnership or corporation (Staring and Naming a Business Presentation, 2012, Slide 5). Some specific advantages include being empowered authorities in the management of the business, diversity of members, limited liability, pass-through taxation, and less paperwork (appreciated by many). A drawback of this business structure is the need for a tailored operating agreement that specifies the specific needs of the

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

Many believe that liability is a biggest issue in a general partnership than in a sole proprietorship. The owners of the company are still fully liable for any debts the company may accrue as well as the liability for any lawsuits that may be brought against the company. However, the bigger issue in a partnership is that now each partner can be liable for the other partner’s actions. If one partner is sued for malpractice, the other partner may suffer because of it.

Is a limited partnership treated as a separate entity for all purposes? If not, give an example of an instance in which a limited partnership is treated as an aggregate of its partners.

B) Managers of LLCs are personally liable for the debts, obligations, and liabilities of the LLC.

A limited liability company protects each partner from personal liability for certain obligations of the company. An important difference from other partnerships is that each partner is liable for the debts and obligations of the partners. With limited liability Company, each state has its own laws governing partners for these vessels. Some states allow only certain professions, such as lawyers and accountants to form LLP. Some states only provide protection from liability for negligence claims, leaving personally responsible for other types of requests partner. For tax purposes, profits are divided equally between the partners and the partnership is not taxed separately.

Control- A limited partner has no say in the running and management in the business. The general partners will have the ability to run the business as they see fit.

This protects the limited partners from the full liability that is shared by the general partners.   Income Taxes – The limited partner’s profits are considered personal income and taxed as such. All profits from the limited partnership are considered personal income and taxed at their personal tax rates.  Longevity / Continuity – The continuity of the business is not affected by the death or disassociation of a limited partner.  An advantage for a limited partner is that the limited partner’s investment takes priority in the general partnership dissolves due to a death or disassociation of one of the general partners.

responsible for business debt, and has one or more limited partnership who are only liable to

Limited Partnership: This partnership consists of a blend of both general and limited partners. This kind of agreement/partnership lets the general partner manage the entire operation, but they are still fully liable for debts. The limited partner only invests his/her money, and can only lose what they invested.

Limited liability: the liability of investors is limited to their personal investments in the corporation.

Limited liability. An LLC shields its members from incurring liability for the business debts and obligations of the other members. The limited liability protection afforded by an LLC is a significant advantage over a general a partnership structure, which does not shield its partners from the liabilities of fellow partners in the event of a partner’s default or exit from the partnership

Besides fraud cases personal assets of the owners, partners, shareholders cannot be seized to repay debts. For a corporation, “The limited liability of shareholders means that they are liable only to the extent of their capital contributions and do not have personal liability for the corporation’s debts and obligation.” (Cheeseman, 2013, 479) In a LLLP there are two types of partners, general and limited. Both types hold, “...No personal liability for partnership’s debts and obligations...” up to the “capital contribution” (Cheeseman, 2013, 472) that was given to the company. The same liability is set for the LLC styles of business, “members of an LLC are not personally liable to third parties for the debts, obligations, and liabilities of an LLC beyond their capital contribution.” (Cheeseman, 2013, 536) All three boost an impressive corporate veil to protect personal assets.

EMBED MSGraph.Chart.8 s Generally, a business owner in a sole proprietorship form of business is liable for all claims that may be made against his or her business. Indeed, the unlimited liability of the business owner in this case remains a key disadvantage of this particular form of business. Therefore, to limit liability, a sole proprietor should familiarize himself with the relevant laws governing the operations of his business. When it comes to contracts, the sole proprietor should ensure that he or she fulfills his or her end of the bargain. Further, it can also be noted that, to some extent, a sole proprietor could limit his personal liability by outlining his liability in a contractual document. Personal liability in a general partnership is usually unlimited. In that regard, a general partner could deem it fit to convert to a limited partner so as to limit his liability. Limited partners