Limited Liability Corporations Verses Corporations Essay

1370 words - 5 pages

University of Phoenix-OnlinePaperDue: Aug 3, 2009IntroductionWhen a person or group of people are considering going into business the first thing that needs to be accomplished is to decide which style of business will be the most effective and profitable to the person or people that will be owning, operating, or investing in the business. The various business styles and entities that exist are Sole Proprietor, Partnership, Corporation, Limited Liability Partnership and Limited Liability Company (LLC). A LLC is not considered a business style instead; an LLC is considered a business entity because it is the combination of advantages from two other business styles. (LLC Information, 2009). With Corporations and Partnerships, being the business style of so many successful businesses across the world it is no wonder that these two business styles were combined. In this report, the LLC business entity and the Corporation business style will be reviewed individually with the focus on some of the advantages and disadvantages associated with both, in addition, to the review will be the personal opinion of which style the author prefers.Limited Liability CorporationsCorporation and LLC's are part of the same family; in fact, a LLC is a hybrid of a corporation and a partnership in the manner that provides the limited liability of a corporation while offering the flexibility and tax assets of a partnership. (Cody, Hopkins, & Perlman, 2007) Owners of a LLC's can vary from one person to several people depending on the state regulations in which the LLC is to be registered. The organizational structure of an LLC is comprised of managers, who handle the internal management of the company, and members, who have certain specified rights in the operation of the company. The Operating Agreement and the Articles of Organization govern the internal management of an LLC and are a mandatory part of the registration process (Staub, 2008) Advantages associated with LLC's are the main reasons why so many businesses are now operating under the formation of an LLC. Three advantages that make LLC's more appealing to prospective business owners are:•Members of an LLC avoid being double taxed because business profit is treated as having "passed through" the entity and onto the individual members, via the 1065 form filed by the LLC, and thus avoiding tax a the corporate level, and again at the member level ("double taxation"). (LLC Information, 2009)•An LLC is not as strict as a corporation is. The allotted flexibility is the result of being able to manage an LLC through the initial operating agreement. (LLC Information, 2009)•LLC only has to have two of the four characteristics to make it legal in the state in which the LLC is to operate.The advantages associated with the operating under an LLC is the reason why during the 90's the growth of states accepting the legislation of LLC went from two states to all 50 states. (Cody, Hopkins, & Perlman, 2007)...

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