Diagram Of Forming A Partnership And Limited Liability Company

2380 words - 10 pages

Diagram of forming a Partnership and Limited Liability Company

A partnership can be formed with usually two to twenty persons who shared a common goal- which is to share profits and losses together. Any partnership more than twenty persons will be treated as a company. An agreement will be discussed and set either in oral or contract form prior to the start of any partnership. A verbally agreement is unsafe as there are no black and white documents that support the agreement in the first place. Therefore, a written agreement is much more advisable. The diagram above shows that there are two different type of partnership. They are the “Limited Partnership” and “Limited ...view middle of the document...

The way they operate is more complex than just a partnership but it is less complex than a limited liability company. In the event of either partner who wishes to discontinue the partnership, they should give a 30 days’ notice to their counter-parts. The “Limited Liability Partnership” is also required to pay a partner the amount of contribution that has been invested and his or her share of profits in the event of death or dissolution.
A “Limited Liability Company” is a hybrid business that combines several features of a corporation and partnership. Referring to the diagram, a “Limited Liability Company” can be privately owned or it can be upgraded to be a public company. The owners of the company need not be local resident but appointing a local resident director is mandatory. The company also needs to hire a personal secretary who will handle all matters pertaining to legal issues when the director is unavailable for at least half a year. Similar like a “LLP”, it has a separate legal personality and they are able to sue or to be sued and can own property under its own name. The advantage of a private limited company is that they are able to operate without the formality of a corporate company. A corporate company usually held formal meetings, taking down of minutes and there is a lot of paper work to be done, whereas, a privately owned business need not follow. Although it is an incorporated business as compared to a corporate company, it still holds a better image than a partnership. Investors and potential clients will take the company more seriously. The tax rate for a “LLC” is below 9% for profits up to $300,000 and capped at 18% for profits above $300,000. Unlike limited company, they are unable to sell their company’s shares in the stock market as they are not public listed company. At any point of time when a “LLC” reached a certain growth, they are able to convert their companies into a corporate business. The company does not depend on the continued membership of any of its members. This means that even in the event of death, resignation or insolvent of its shareholders or directors, the company is still able to operate. Due to its flexibility, most small to medium size firms will still choose to incorporate their company to “LLC”. Some examples of professional companies that incorporate their business into “LLC” will be Lawyers, Accountants and Architects.
After deciding the type of formation which one desire, it is also important to know the legal process of registering a company. A company will only be recognized by the government after it has been registered. The person who is registering the company must be a local resident, who is above the age of 18 and it can be done by using the internet or engaging the use of professional firm such as Lawyers, Accountants or service bureau (Rikvin). The process takes about 15 minutes or 14 days to 2 months if referring to higher authority is required....

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