Limited Liability Corporation vs. Limited Liability Partnership: Assignment – FIN 419, Week 1

Summary

Limited Liability Corporations and Limited Liability Partnerships are two business structures. A student learns how they differ and which might be best for a particular business.

Introduction to business structures

Business planning includes choosing a business structure. This part compares Limited Liability Corporations and Limited Liability Partnerships. Both have limited liability, but they differ in who can form them and how they are taxed.

Limited Liability Corporation details

A Limited Liability Corporation can have one or more members. Members have limited liability. The corporation itself is responsible for its debts. Members pay taxes on their share of the profits.

Limited Liability Partnership details

A Limited Liability Partnership has at least two partners. Partners have limited liability for the business's debts. Partners are only responsible for their own actions and debts. They are taxed separately.

Choosing the right business structure

The choice between an LLC and an LLP depends on the business needs and the interests of the owners. This part discusses when each structure might be the better choice.

Key terms

Limited liability

Members or partners are not personally responsible for the business's debts.

Pass through taxation

Profits are taxed as personal income of the members or partners.

Personal guarantee

A member's promise to be responsible for a debt if the corporation cannot pay.

Managing partner

A partner who runs the day-to-day operations of the business.

Limited partner

A partner who invests in the business but does not manage it.

Double taxation

A corporation pays tax on its profits, and then shareholders pay tax on the dividends.

Questions this document helps with

• When should a business choose to be an LLC?
• What are the main differences between an LLP and an LLC?
• How does taxation work for an LLP?

Summary written with AI from the document's text.