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Legal Form Of Bussiness Essay

1152 words - 5 pages

LEGAL FORM OF BUSSINESS

In this paper we will compare and discuss different forms of business and their advantages and disadvantages. Following are the different type of business formed to conduct work:
1. Sole proprietorship.
2. Partnership.
3. Limited liability partnership.
4. Limited liability company.
5. S corporation.
6. Franchise.
7. Corporate.
1. Sole proprietorship,
The sole proprietorship is a type of business entity that is owned and run by one individual. All the decisions of the business are made by that individual and there is no legal distinction between that individual and the business.
Following are the advantages and disadvantages of Sole proprietorship
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In an LLP, some partners have a form of limited liability similar to that of the shareholders of a corporation.
In some countries, an LLP must also have at least one "general partner" with unlimited liability. Unlike corporate shareholders, the partners have the right to manage the business directly. In contrast, corporate shareholders have to elect a board of directors under the laws of various state charters.
Limited liability partnerships are distinct from limited partnerships in some countries, which may allow all LLP partners to have limited liability, while a limited partnership may require at least one unlimited partner and allow others to assume the role of a passive and limited liability investor. As a result, in these countries, the LLP is more suited for businesses where all investors wish to take an active role in management.
3. Limited Liability Company
Advantages
An LLC provides the choice of tax regime. The organization can elect to be taxed as a sole proprietor, partnership, S corporation or C corporation , providing for a great deal of flexibility.
A limited liability company with multiple members that elects to be taxed as partnership may specially allocate the members' distributive share of income, gain, loss, deduction, or credit via the company operating agreement on a basis other than the ownership percentage of each member.
Limited liability, meaning that the owners of the LLC, called “members”, are protected from some or all liability for acts and debts of the LLC depending on state shield laws. Much less administrative paperwork and record keeping than a corporation.
Pass-through taxation, unless the LLC elects to be taxed as a C corporation.
Using default tax classification, profits are taxed personally at the member level, not at the LLC level.
LLC in most states are treated as entities separate from their members. However, in some jurisdictions such as Connecticut, case law has determined that owners were not required to plead facts sufficient to pierce the corporate veil and LLC members can be personally liable for operation of the LLC.
For real estate companies, each separate property can be owned by its own, individual LLC, thereby shielding not only the owners, but their other properties from cross-liability.
Disadvantages
It may be more difficult to raise financial capital for an LLC as investors may be more comfortable investing funds in the better-understood corporate form with a view toward an eventual IPO. One possible solution may be to form a new corporation and merge into it, dissolving the LLC and converting into a corporation.
The management structure of an LLC may be...

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