Quiz 27: Limited Liability Companies and Special Business Forms
The advantages that limited liability companies offer to the businesspersons that are not offered by sole proprietorships or partnerships are as follows: • The responsibility of the member's in case of LLC is restricted to the extent of their share and investment. • The LLC is to a certain extent flexible with respects to both administration and taxation. • An LLC comprises of two or more supporters who can decide to be taxed either as a concern or a partnership. • LLC provides flexibility to the business executives in terms of management and occupational actions. • LLC as a form of trade is very striking that boosts investment.
The contract law will apply in this situation. In case of companies having limited liability, the profit and losses must be distributed between all the participants in the way that is delivered in the operating agreement or the articles of organization. If nothing is mentioned in the operating agreement or articles of organization then the profit and losses shall b distributed in the agreed value which is decided at the time of forming the limited liability. The members can also distribute the profit and losses in the proportion of capital contributed by them.
An LLC is a body which is formed by the statute of state. On the basis of number of members in the LLC the corporations or partnership will be formed. If LLC have only one member then it will be cooperation but if the LLC comprises of more than one member then it would be a partnership. Davidson masonry would be taxed as a partnership under the form 1065 of schedule K-1's.