Free Custom «The Advantages of Conducting a Limited Liability Company against a Regular Corporation» Essay Paper

There are several benefits of conducting a Limited Liability Company (LLC) over a regular corporation as discussed below:

Limited Liability

LLCs offer limited liability security to their members exempting them from being personally accountable for the LLC’s business liabilities, obligations, debts and lawsuits. This means that the individual assets (savings account, house, car etc.) of the owners cannot be pursued by creditors in an attempt to pay business debts. This is an advantage over regular corporations where business and members are regarded as similar under the law, leaving the private assets of the owners vulnerable.

Flexible Management Structure

LLCs have the freedom to set up any organizational structure decided upon by the owners of the company. The owners are free to choose between two management structures i.e. manager managed and member managed. This is an advantage because it permits members to have the flexibility to choose how to manage the operations of the company. This is unlike regular corporations that have a board of directors to supervise the company’s key business decisions, as well as executives who are responsible for the management of the company’s daily operations.

 

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Limited Formalities

The laws of LLC impose very few formalities with regards to decision making amongst managers and members. For instance, the business structures of LLCs do not require the writing of minutes or resolutions during corporate meetings. This contrasts regular corporations where it is a requirement to hold meetings, keep official minutes and record resolutions. This provides more time to the members of LLCs to focus more on the business operations.

Flexible Ownership Structure

Laws of LLCs are on the basis of contractual flexibility, which permits the owners to choose the voting rights, profit distribution, ownership structure of the company. Unlike common partnerships where profit split is 50-50, LLC members are flexible to distribute profits based on a formula they have agreed upon.