Question

1. What does it mean for a business to offer its owners "limited liability"? Why is limited liability considered advantageous?

2. What is a fiduciary duty? Discuss throughly. Who owes a fiduciary duty in the business associations you've learned about?

3. How are LLC's and Corporations similar? How are they different?  

4. Compare and contrast general, limited and limited liability partnerships. And, if you had to start a partnership, which would you choose and why? (In your scenario, be sure to tell me what type of business you're starting.)

Answer 1

1.

Limited liability company refers to the company that provide limited liability to its owners. These companies are  not formed for profits. This is business entity that includes the characteristics of both a corporation and a partnership or sole proprietorship based on the number of owners. LLC can be sold to other party through transfer of ownership. LLC change of ownership form is used to the transfer ownership of a LLC.

The similar characteristic of LLC and corporation is limited liability and that with partnership is that the taxation is done at the individual owners' level and reduce the effect of double taxation. The profit and losses of LLC is passed through its members who are LLC owners and this information is reported in their personal tax return.

Limited liability companies are considered advantageous because: -

• Pass-through taxation
• There is no restrictions on the number of members included in business.
• Company management can be structured flexibly.
• Does not require much paperwork.
• Owners are not responsible for business debts and liabilities.