Business Formations : The Legal Environment

| The partners are jointly and severally liable for business debts and obligations. The partners are held personally responsible for the business and may be sued personally for liability. Partners’ personal assets are subject to lawsuit(s) made against the business. Lack of continuity; death of a partner may end the partnership/business if a buy/sell agreement is not in place. Disagreements may be difficult to resolve.

This protects the limited partners from the full liability that is shared by the general partners.   Income Taxes – The limited partner’s profits are considered personal income and taxed as such. All profits from the limited partnership are considered personal income and taxed at their personal tax rates.  Longevity / Continuity – The continuity of the business is not affected by the death or disassociation of a limited partner.  An advantage for a limited partner is that the limited partner’s investment takes priority in the general partnership dissolves due to a death or disassociation of one of the general partners.

A limited liability company protects each partner from personal liability for certain obligations of the company. An important difference from other partnerships is that each partner is liable for the debts and obligations of the partners. With limited liability Company, each state has its own laws governing partners for these vessels. Some states allow only certain professions, such as lawyers and accountants to form LLP. Some states only provide protection from liability for negligence claims, leaving personally responsible for other types of requests partner. For tax purposes, profits are divided equally between the partners and the partnership is not taxed separately.

Liability- The general partner would be liable for all unlimited responsibility on all tasks and debt, while the limited partner will not loss more than their investment.

Many believe that liability is a biggest issue in a general partnership than in a sole proprietorship. The owners of the company are still fully liable for any debts the company may accrue as well as the liability for any lawsuits that may be brought against the company. However, the bigger issue in a partnership is that now each partner can be liable for the other partner’s actions. If one partner is sued for malpractice, the other partner may suffer because of it.

responsible for business debt, and has one or more limited partnership who are only liable to

Limited Partnership: This partnership consists of a blend of both general and limited partners. This kind of agreement/partnership lets the general partner manage the entire operation, but they are still fully liable for debts. The limited partner only invests his/her money, and can only lose what they invested.

B) Managers of LLCs are personally liable for the debts, obligations, and liabilities of the LLC.

Limited liability means it does not exceed the amount invested in a partnership or limited liability company. The limited liability feature is one of the biggest advantages of investing in publicly listed companies. While a shareholder can participate wholly in the growth of a company, his or her liability is restricted to the

There are four primary forms of entities available to Penelope, Mark, and John. Notably, they include a limited liability company option, partnership, or a corporation (especially S-Corporation). The sole proprietorship option is not ideal in this case as it is run by an individual. In most cases, it is limited to sole benefits (Schwidetzky & Brown, 2015). However, the three are highly specialized and knowledgeable in their areas of expertise. Besides, the liabilities associated with sole proprietorship are personal. The

Some of the benefits of a Limited Liability Company are that as a Limited Liability Company it limits the owner of personal liability for business actions. The members are liable, but normally just to the amount of their share in the business. Their individual assets are not considered for resolving business debts. The fact that your personal assets are protected is a great benefit. Whereas, operating under a partnership all members are individually accountable for the company’s debt. In comparing the differences between a

Limited liability. An LLC shields its members from incurring liability for the business debts and obligations of the other members. The limited liability protection afforded by an LLC is a significant advantage over a general a partnership structure, which does not shield its partners from the liabilities of fellow partners in the event of a partner’s default or exit from the partnership

All partners are jointly and severally liable for all the debts and actions of the partnership. This means that each partner is liable for any debts or actions even if caused by the other

EMBED MSGraph.Chart.8 s Generally, a business owner in a sole proprietorship form of business is liable for all claims that may be made against his or her business. Indeed, the unlimited liability of the business owner in this case remains a key disadvantage of this particular form of business. Therefore, to limit liability, a sole proprietor should familiarize himself with the relevant laws governing the operations of his business. When it comes to contracts, the sole proprietor should ensure that he or she fulfills his or her end of the bargain. Further, it can also be noted that, to some extent, a sole proprietor could limit his personal liability by outlining his liability in a contractual document. Personal liability in a general partnership is usually unlimited. In that regard, a general partner could deem it fit to convert to a limited partner so as to limit his liability. Limited partners

Besides fraud cases personal assets of the owners, partners, shareholders cannot be seized to repay debts. For a corporation, “The limited liability of shareholders means that they are liable only to the extent of their capital contributions and do not have personal liability for the corporation’s debts and obligation.” (Cheeseman, 2013, 479) In a LLLP there are two types of partners, general and limited. Both types hold, “...No personal liability for partnership’s debts and obligations...” up to the “capital contribution” (Cheeseman, 2013, 472) that was given to the company. The same liability is set for the LLC styles of business, “members of an LLC are not personally liable to third parties for the debts, obligations, and liabilities of an LLC beyond their capital contribution.” (Cheeseman, 2013, 536) All three boost an impressive corporate veil to protect personal assets.