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Advantages and Disadvantages of Limited Liability Company

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TASK 1

Using the internet, research the concept of limited liability company and summarize in 500 words. A limited liability company is the simplest form of company that allows people to invest in a business by purchasing shares. In the case of good performance, the value of the investments grows, but in the case of bad performance, the shareholders are only liable for their initial investments. So, the rest of the work will be focused on the operation mode, the advantages and disadvantages of limited liability company.

Way of Work of The LLCs

The operating mode of a limited liability company is very simple. Shareholders have a right to information on the progress of the business, but this right is less extensive than in other companies, as their liability is limited. They participate in meetings to vote on collective decisions for the company. But before each work, the rules of the company must be established in accordance with the rules decreed by the country the company is formed.

Advantages and Disadvantages of Limited Liability Company

Advantages of LLCs

Work in limited liabilities company present many advantages for the shareholders. Some of these are:

  • The members are protected from lawsuits. They cannot be held liable for company losses, debts and business credit, and their personal assets (such as a house or car) cannot be recovered by the debtors.
  • The members are reassured before putting her money due to the flexibility of the rules and the tax.
  • The business appears more credible to the different customers and creditors.
  • Flexible membership: Members of a Limited Liability Company may include individuals, partnerships, trusts, estates, organizations, or other business entities, and most states do not limit the type or number of members.

Broadly speaking, a limited liability company does not abide by the same rigid rules of corporations. Companies are even flexible when it comes to taxes, offering many options so you can create a tax plan that works for you. This simplicity, protection, and ease of use have made forming an LLC a popular choice for small businesses in America.

The following table shows the advantages of a limited liability company compared to other types of organisations:

Corporations General

Partnership

Sole proprietors Limited Liability

Company

Business duration can be perpetual × ×
Can be owned by another business × ×
No required annual meetings × × ×
Created by state level registration × ×
Owners can report profits and losses on personal tax returns × × × ×
Owners have limited liability protection × ×

Disadvantages of LLCs

Despite the advantages, this form of company has many drawbacks such as:

  • Bankruptcy
  • Difference in opinions amongst members can cause the business to dissolve.
  • The poor management of the companies can also cause dissolution.
  • Because LLCs are pass-through entities like a sole proprietorship, LLC owners are responsible for paying taxes on their share of LLC income, whether or not they are given a disbursement. This is why LLCs don’t attract investors like a corporation.

To conclude, a limited company is a very good form of organisation that allows flexibility of work, protection, trust, credibility, and suitability but that also shows many disadvantages like the bankruptcy if the company is not well managed or problems in decision taking. As far as I am concerned, a limited liability company is the best form of company due to the protection of your goods after bankruptcy or dissolution.

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