I and two of my classmates are setting forth on a new business venture upon graduation in 2017. We have decided collectively to name this business “Sign Slappers”. Our business will manufacture, sell and distribute motivational posters and collegiate signage such as the famous Notre Dame “Play Like A Champion” sign. As of all new businesses we will require extensive upfront capital investment to get off the ground. Along with our own personal investment we will require additional capital from domestic and foreign investors. Out of the many different business entities we have chosen to structure our company as a Limited Liability Company or LLC with the corporate governance structure and operating agreements that replicate a C corp. Over the next few pages I will explain how we came to that decision and why we did not choose one of the many other options. I will begin by explaining the benefits of an LLC and why we chose to start our company as such. Typically the benefits of creating an LLC outweigh many of the perceived disadvantages that are unavailable to both sole proprietorships and general partnerships. LLCs provide some liability protection to their owners, who are generally not personally responsible for the business debts and liabilities of the LLC. Creditors cannot pursue the personal assets of the owners to pay …show more content…
As we seek outside investors, using a C corporation structure rather than an LLC has potential advantages. In structuring this way we will ensure leadership the flexibility to operate the company as needed to be successful and profitable. It will also be more appealing for outside investors to get a better idea of how the company is run and what their potential returns and exit strategy may
As a hybrid of partnerships and corporations, LLC’s provide limited liability for debts and flexibility to be taxed as a partnership or corporation (Staring and Naming a Business Presentation, 2012, Slide 5). Some specific advantages include being empowered authorities in the management of the business, diversity of members, limited liability, pass-through taxation, and less paperwork (appreciated by many). A drawback of this business structure is the need for a tailored operating agreement that specifies the specific needs of the
The organizational forms a company might have as it evolves from a start-up to a major corporation are: sole proprietorships, partnerships and corporations. The advantages of a sole proprietorship are that is is easily and inexpensively formed; is subject to few government regulations and it’s income is not
The company is the corporation’s question mark performer and has the potential of becoming a star performer given the limited competition in the market. The company has the advantage of the parent corporation’s 25-year-old positive reputation as a local family owned business known for the quality of their products.
5. What advantages help explain why virtually all large companies are organized as C corporations?
When looking at liability, creating an LLC will limit the owner’s exposure to just his invested amount. This will legally shield his home, bank accounts, family’s property and other personal assets from seizure or liquidation in the event the company is held responsible for any of the situations mentioned, such as a cabinet falling or subcontractor failing to perform. It would also protect him in the event the expansion of his company fails, and a worst case scenario of the company going under.
This allows each owner to protect personal assets from claims and lawsuits against the company. This limits the liability of each owner the amount that he or she has invested in the business. The LLC also has the option to choose your own tax situation. In addition, the ruling does not affect the personal finances of the owner as a sole proprietorship.
Limited liability company is a separate entity that separates the owner of the business. LLCs are no longer new and untested legal entity, they recognized in all fifty states and have established case law and statutes.
In addition to the advantages named above, the LLC will allow each member to have clearly defined roles and management duties, as well as clearly defined ownership stakes and shares of profits and losses. As we will discuss in the coming sections, the formation of the Operating Agreement for the LLC will help to clearly establish these roles, allowing each of you to focus solely on your aspect of the business and allowing it to run as smoothly as possible (5).
A Limited Liability Company (LLC), as the name states, has the ability in keeping your liability limited as a professional owner. This is fundamental in protecting your personal assets by separating them from your business assets. In choosing to run a LLC company, we have agreed that a manager-managed business would be conducive to our field of industry. Although one person will have the authority in overseeing the daily tasks of running the business, all non-managing members will still have an input in all decisions in regards to the enterprise. Contract negotiations and employment are just a few of the joint duties of all members. Running an LLC has many advantages like flexibility, limited liability in business related debts, pass-through taxes, and reliability standing. However, with perks there are always some downfalls, such disadvantages consists of being subjected to self-employment tax or if a member departs the LLC ceases to exist, although an Operating Agreement can reverse this challenge. As you can see, running an LLC has more pros, out weighing the cons of such companies.
In this business formation the business takes on all liability removing any personal liability from all involved partners.
Liability: Members of an LLC enjoy limited liability for the debts and obligations of the business, including liability for the unlawful acts of other members and employees.
The main advantage of the LLC form of organization is the limited liability for the owners. The LLC must meet certain criteria, otherwise it will be considered a corporation by IRS and subject to double taxation. Owners of LLC pay personal income tax.
Limited liability Company (LLC): Business’ owners are only subject to limited liability for company’s debts and actions. Owners will be only liable for their own mistakes or negligence that they may show in occasions.
After reviewing the pros and cons to LLC and corporation business structures, as well as the business strategy of the McGee Cake Company, I would recommend to Doc and Lyn that they form a corporation to move the company forward. Although initial set of a corporation up may be complicated and have some cost, the potential for the company is great. The scope of the possibility is what makes the corporation
However, In a LLC (Limited Liability Corporation) the owners not personally liable for the LLC’s debts (There are some exceptions to this