Legal Forms Of Business Organization Essay

1062 words - 5 pages

Limited Liability Corporation, Limited Liability Partnership, Corporation Paper
Angelika Evanoff
FIN/419
July 20, 2015
Mrs. Michele Huss

Limited Liability Corporation, Limited Liability Partnership, Corporation Paper
The purpose of this paper is to discuss three legal forms of business organization; a limited liability corporation or company, a limited liability partnership, and a class C corporation. The paper begins with a brief description of each structure, followed by a comparison and contrast of each form’s advantages and disadvantages. The author finishes by citing examples in which she would use each type of business structure if establishing a new business. It is important ...view middle of the document...

An LLC is also taxed as a partnership, which means the company is only taxed once. Corporations are double taxed and is presented later in the essay (“Limited Liability Company,” 2011). An LLC can own more than 80% of another corporation and corporations, partnerships, or non-U.S. residents can own LLC shares (Gitman & Zutter, 2014).
A limited liability partnership is a form of partnership that allows its owners to be responsible for their investments and not those of their partners. It is also taxed as a partnership, meaning only once on each partner’s personal tax return. According to Gitman and Zutter (2014), other benefits of an LLP include enhanced borrowing power and increased available brain competence and managerial capability. Legal and accounting professionals frequently use an LLP, which often have large numbers of partners (Gitman & Zutter, 2014).
A C class corporation is a type or corporation where profits of the firm are taxed twice under subchapter C of the Internal Revenue Code (“What is a C Corporation?” 2015). Double taxation is an unappealing disadvantage, but class C corporations have other benefits. For example, owners of a C corporation enjoy limited liability for company debts and can deduct certain costs of benefits as business expenses. They can also have an unlimited amount of stockholders and have no binding on the type of investors it has (“What is a C Corporation?” 2015). Class C corporations have a capability to reinvest surplus earnings in the company at a lower corporate tax rate (“C Corporation,” 2015). Owners of class C corporations are called stockholders. They elect a board of directors who are accountable for implementing strategic objectives, establishing general policy, guiding corporate ventures, and recommending major expenditures (Gitman & Zutter, 2014).
Establishing a New Business
There are several circumstances, such as business type and goals, in which a person would use each type of business structure when starting a new company. For instance, owners may choose to file as a limited liability company if they want to take advantage of tax and limited liability benefits or expect to have an unlimited amount of shareholders. People who desire a full participatory role in the business’s operation and accept a limited firm life could opt to form as an LLP (“Choose your business structure,” 2015). Owners may decide on a limited liability partnership over a corporation...

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