With the existence of both corporations and partnerships, we may already be aware that there are specific types as well. These include LLC's and LLP's, which denote "Limited Liability Company" and "Limited Liability Partnerships." For each title, the idea that is maintained is that both "members" of the companies as well as "partners" of the partnerships be held liable, but only to a point, meaning not in its entirety.
When referencing a limited liability company, we may relate it to the advent of smaller businesses, which may now have the opportunity to garner the advantages attached to corporations while still maintaining their reduced business models in terms of size. The IRS states that an LLC enables its owner to possess "limited personal liability" in connection to losses or other adverse actions against the company. Ownership of such a company is not confined to specific parties in accordance to business law. They may include sole "individuals, corporations," and other parties.
Under business law, an "operating agreement" will be necessary to state how exactly such a company is broken down in terms of its "shares of ownership," for instance. This, however, is dependent upon the specific state in which you reside. Business that may not attain the distinction as an LLC include those such as banking institutions and insurers. The benefits of rendering you company under the title of LLC include the following: varying options in terms of tax qualifications, limited liability, decreased paperwork in comparison to larger entities, ability to be owned by one person, and no requirements for the existence of shareholders as well as other formalities.
The downfalls include the hardships involved in creating profits, the possibility of compensation required for varying taxes, hefty "renewal fees," loans having to be spoken for by single persons, and the likelihood of foreign "taxing" authorities putting LLC's in the same category as corporations.
A business that represents itself under the title of LLP must have been formed by professionals such as accountants and business lawyers in most states. In addition to this, only half of all states may legally accept such business law concerning LLP's. They must possess licenses, much like that of LLC's, in order to operate under business law.
By entering into a limited liability partnership, partners may no longer be held accountable for debts of other partners. In general agreements concerning such partnerships must be composed in writing. In relation to taxes, partners in LLP's may also be limited in the amount of losses they may deduct as well. Other disadvantages include the fact that decisions may be made in the absence of other partners.
In addition any assets garnered by the LLP are shared congruently throughout the partnerships. Investments and money transfer are also not as smooth a process within LLP's as opposed to corporations, which may make people wary of partaking in such endeavors. It would be advisable for you to do further research when deciding on what type of company you will place your efforts into.