Limited Liability and Partnership Corporation Essay

Limited Liability and Partnership Corporation - Essay Example This stipulation becomes of significant value when the company defaults or files for bankruptcy subsequently initiating a liquidation process. 2) Auditing Ease: - Limited liability companies require much less paperwork and bookkeeping than corporations. Also some of the standard laws of the company’s ordinance applicable on corporations do not apply on limited liability companies such as annual general meeting, appointment of directors, annual reports, etc. 3) Advantageous Tax Treatment: - A limited liability company has the privilege of being taxed as a sole proprietorship, partnership or a corporation. This fact is of significant value as several entities may chose different options depending on the state tax laws in place. 4) Avoiding Double Taxation: - Unlike corporations, Limited liability companies do not have to face double taxation, although the shareholders have limited liability. In corporations, taxes are applicable at the corporate level first and then at the share holder level. Such is not the case with a limited liability company (Jitman, 2009). ... This fact does not allow a limited liability company to gauge loans or investments easily as most lenders seek personal assurances in case of default which defeats the purpose of LLC. 2) Managerial Difficulties: - This new form of the business organization is understood by most stakeholders involved initially which results in managerial difficulties in determining the chain of command to people within and outside the organization. Creditors are reluctant to lend as they do not quite understand who is responsible. (Mclaney, 2009) Partnership Introduction: - A partnership is an association of individuals or an unincorporated company that is formed by two or more persons, created by agreement along with proof of existence and personal liability of owners in case of default or liquidation of the company (Mclaney, 2009). Partnerships are characterized by intricacies in terms of defining relationships between partners themselves and relationship of the partnership company among the outside world. The problem of relationship between the partners is sorted out with a legal binding contract that lays down the framework of the company along with individual and collective responsibilities. Members in a partnership can stretch from 2 to 20 depending on the need of capital and other necessities of the business (Jitman, 2009). The assets of a business are owner by the partners and the partners are jointly or severely responsible for fulfilling liquidation clauses and terms in case of default, including keeping their personal assets at stake for paying creditors. Each partner is deemed to be an agent of the business hence if a partner is carrying out business related