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Limited Liability Company is better than Partnerships

Currently, there exist several business kinds such as limited liability companies, partnerships, and sole proprietorships among others. Each of them is different in its own way such that each has its own merits and demerits. The legal requirements for instituting a company are very different from those for a partnership. Also, the structure, liability to debt, dissolution and profit share for each differs from the other. For these reasons, choosing the appropriate business type to venture into is a matter requiring a very cautious approach. Making this decision involves weighing the benefits of each of the alternatives and settling for that which seems more favorable (Spadaccini, p 3). The first advantage associated with limited liability companies is that the shareholders are not personally liable for the company’s debts. Investors’ liability does not exceed the amount of money each has contributed towards the established of the business. His assets cannot be used to cover the amount the company owes its creditors (Clifford, p 14). A company bears a legal entity which is totally separate from the owners and the board of directors. The shareholders cannot be sued in a law court but instead, the suit is made against the company itself. Even though it is not a natural person, a company is recognized as a person created by act of law. When it comes to the matter of taxes, companies pay corporation taxes whose rates are lower compared to the income taxes paid by individual partners. The nature and amounts of deductibles and allowable expenses increase the tax related benefits for companies. Also, these business entities do not fall victims of double taxation. In the event of a shareholder’s death or bankruptcy, a company does not cease to exist. Such an occurrence cannot affect the continuity of the firm neither can it lead to its dissolution whatsoever. Therefore, an investor will be interested in investing in the company since he is certain that it has the higher chances of remaining in business for longer. On the other hand, companies have their own disadvantages as well. For instance, issuance of shares fro public subscription leads to the dilution of the ownership of the form. Control of the company becomes a huge challenge considering that the number of owners increases when more people buy shares. Accounting for companies and the guidelines for maintaining books of account are very complex in nature. It is a requirement for the directors to present the final statements of accounts to shareholders for every financial year. A lot of input is fundamental to ensure they are error free.A partnership, as a form of business enterprise, has its own benefits as well as weaknesses. One can begin by saying that it is easier to run compared to a company due to its simple structure. The complex nature of companies in both their institution and running makes some decision makers opt for partnerships.Partners in a partnership establishment bear total liability for the debts as well as losses. If by any chance the business is faced with huge amounts of debt, the partners’ assets or property can be taken to cover the debts. Seeking funding or capital money from the public is not allowed for partnerships. In their case, they cannot issue shares to the public in a move to collect money for capital. This restriction tends to limit the capital sources for any business registered as a partnership. Death, bankruptcy and disability of one of the partners can cause dissolution of the partnership. This business structure has an uncertain lifespan and partnership agreement can be terminated anytime provided there is a good reason for that to happen.ConclusionBased on the arguments above, it is evident that adopting a limited liability company structure is the better option compared to the partnership structure. A business owner does not have to worry about losing his assets in case the business is overburdened with debt. Furthermore, it’s a sure way of ensuring that the owner runs his operations while at a peaceful state of mind. This eases the achievement of the goals and objectives of the venture. To make an informed decision, a decision maker must have a very good understanding of the business structures in existence. As mentioned earlier, they all have different advantages and disadvantages. The formalities for starting each of them differ; which means that the procedures for starting a company are not the same as those for starting a partnership. Therefore, without a good understanding, an individual is likely to make a bad investment decision.

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