Roles of Limited Liability Corporations and Partnerships
In today’s society people are establishing new businesses with different business structures. The individuals need to check with the state they reside to see if the particular entity is acceptable. The paragraphs below will explain the roles of limited liability corporations and partnerships. The paper will also explain the business structure that will be more appropriate to use when opening a small business. Limited partnerships (LPs)
According Gitman (2009), to Limited partnerships is a partnership in which one or more partners have limited liability as long as at least one partner ( the general partner) has unlimited liability. In limited partnerships at least one of the owners is considered a general partner who makes business choices and is personally responsible for any debts the company might incur. Limited liabilities also have at least one limited partner who invests funds in the business but has a minimum control over day-to-day operations and decisions. Limited partners give financially to a company, for example; a LP might contribute $50,000 into a real estate partnership but cannot contribute as much too any activities in the business. Since LPs have no management control they have protection against personal liability. This basically means that a LP cannot be forced to use personal assets to pay off any company debts but a LP can lose the money invested in the business. LPs individual partners have to report and pay their share of revenue each year for tax purposes. Because LPs are not active in a company they do not have to pay self-employment taxes. In any case if evidence proves a LP has been active in a business, the individual will be held responsible for any general partnership claims. Another type of partnership is Limited liability partnership. Limited liability partnership (LLP)
According to Gitman (2009), LLP is a partnership that is liable for their own acts of malpractice,...
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