Solved: What is a limited liability company? Explain the advantages and disadvantages of this

What is a limited liability company? Explain the advantages and disadvantages of this type of business ownership?

Expert Answer

Limited liability company- This also enjoys limited liability just as C corporation and S corporation for business debts and obligations. the difference is There is no need to file corporate tax returns in this type of corporations. it gives a protection on the personal assets of the owners as it is limited liability.

LLC are Limited Liability Cormpany are the ones which combine the pass through taxation of partnership or sole proprietorship with the limited liability of the companies . This kind of comapny also has its own seperate legal entity and debts from the owners of the business. If a person is attached to an LLC, then he will be referred to as an member of LLC. It can have either single member or multiple members.

It is the most desired form of business because- (advantages b

  1. It gives limited liability to its members ,limited to the amount of capital they have invested in the business, that means the members enjoy the protection of limited liability just as the companies do.
  2. It helps the aspiring businessmen from saving their assets from being attached to the business.
  3. It helps to prevent double taxation unline C Corp business structure. In this the LLC is not taxed rather it is the members who are taxed singularly on their incomes. Double taxaton is avoided with this business structure.
  4. One more advantage related to taxation is that the members can choose how they want their business to get taxed. Idealyy it is taxed as sole proprietorship or partnership business but members can choose it to be taxed as C Corp or S Corp business structure as well.
  5. It requires minimum compliance requirements at the time of registering. It is the most convinient type of business to get registered.

The disadvantages of Limited Liability Companies are –

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