limited liability

Examples of limited liability in the following topics:

• Types of Ownership

  • A business with limited liability, and a wide variety of shareholders.
  • A situation in which the liability of the owners of a business is limited to the full, paid-up value of the share capital.
  • In the United States and some other countries, a limited company is known as either a corporation or a limited liability company (LLC) .
  • A situation in which the liability of the owners of a business is limited to the full, paid-up value of the share capital.
  • In the United States and some other countries, a limited company is known as either a corporation or a limited liability company.

• Types of Corporations

  • Four main types of corporations are designated as C, S, limited liability companies, and nonprofit organizations.
  • A C corporation has no limit on the number of shareholders, foreign or domestic.
  • Must be an eligible entity (a domestic corporation, or a limited liability company which has elected to be taxed as a corporation).
  • It is a legal form of company that provides limited liability to its owners in the vast majority of United States jurisdictions.
  • The primary characteristic an LLC shares with a corporation is limited liability, and the primary characteristic it shares with a partnership is the availability of pass-through income taxation.

• Limited Liability Companies (LLCs)

  • A limited liability company (LLC) is a hybrid business entity that has characteristics of both a corporation and a partnership (or sole proprietorship depending on how many owners).
  • An LLC, although a business entity, is a type of unincorporated association and is not a corporation (calling it a limited liability corporation is incorrect).
  • Limited liability company members may, in certain circumstances, also incur a personal liability in cases where distributions to members render the LLC insolvent.
  • However, most states do not dictate detailed governance and protective provisions for the members of a limited liability company.
  • In essence, this franchise or business privilege tax is the fee the LLC pays the state for the benefit of limited liability.

• Types of Partnerships

  • For the purpose of this discussion, the most important types of partnerships to consider are general partnerships, limited partnerships, joint liability partnerships, several liability partnerships, and limited liability partnerships.
  • However, the limited partner is protected by limited liability in legal situations regarding debt or other costs that may impact the general partner's personal assets.
  • It is also important to understand that this is not the same as a limited liability partnership (LLP), in which all partners have limited liability.
  • Finally, there are limited liability partnerships (LLPs).
  • In this situation, some or all partners have limited liability, which grants it some similarity with a corporation.

• Advantages of Corporations

  • Shareholders of a modern business corporation have limited liability for the corporation's debts and obligations.
  • When a person owns shares in a corporation, the losses cannot exceed the amount invested in the shares, which is called limited liability.
  • Unlike a partnership or sole proprietorship, shareholders of a modern business corporation have limited liability for the corporation's debts and obligations.
  • Without limited liability, a creditor would probably not allow any share to be sold to a buyer at least as creditworthy as the seller.
  • Limited liability reduces the amount that a shareholder can lose in a company so it allows corporations to raise large amounts of finance for their enterprises by combining funds from many stock owners.

• Partnerships and Taxes

  • It is designed to provide the limited liability features of a corporation and the tax efficiencies and operational flexibility of a partnership.
  • The time limit can be continued, if desired, by a vote of the members at the time of expiration.
  • LLCs must not have more than two of the four characteristics that define corporations: Limited liability to the extent of assets, continuity of life, centralization of management, and free transferability of ownership interests.
  • Discuss the general tax requirements for subchapter S corporations and limited liability companies

• Pros and Cons of a Corporation

  • The corporate structure is less simple to found and maintain but has the advantages of limited liability and perpetual life.
  • In many jurisdictions corporations, whose shareholders benefit from limited liability, are required to publish annual financial statements and other data, so that creditors who do business with the corporation are able to assess the creditworthiness of the corporation and cannot enforce claims against shareholders.
  • Shareholders, therefore, experience some loss of privacy in return for limited liability.
  • They are limited in liability to the amount they have invested in the corporation.
  • This limited liability also makes financing more attractive from a risk perspective.

• Types of Businesses

  • Primary ownership types of businesses include corporations, cooperatives, limited liability partnerships (LLPs), limited liability companies (LLCs) and sole proprietorships.
  • The business owner has unlimited liability for the debts incurred by the business.
  • The three typical classifications under for-profit partnerships are general partnerships, limited partnerships, and limited liability partnerships.
  • Corporation: A corporation is a government-owned, publicly-owned, or privately- owned limited liability business that contains a separate legal personality from its members.
  • Cooperative: Often referred to as a "co-op", a cooperative is a limited liability business that can organize as for-profit or not-for-profit.

• Pros and Cons of a Partnership

  • The partnership structure has the benefit of simplicity and control but the drawback of personal liability for the partnership's activities.
  • Limited partnerships allow limited liability for some partners who have no management authority, and in some cases (depending on the jurisdiction) limited liability partnerships provide for limited liability for all partners.

• Disadvantages of Sole Proprietorships

  • Sole proprietorships face a number of difficulties in the longer terms compared to limited liability companies.
  • However, while there are certain advantages (it is easier to set up a sole proprietorship than a limited liability company, for instance), there are a number of big disadvantages, particularly in the long term, that make the sole proprietorship model quite unattractive to business owners.
  • Unlimited liability: Your small business, in the form of a sole proprietorship, is personally liable for all debts and actions of the company.