Forming a Partnership Explain the Role of Essay
- Length: 7 pages
- Sources: 4
- Subject: Business
- Type: Essay
- Paper: #62881973
Excerpt from Essay :
Forming a Partnership
Explain the role of agency your business association
Agencies play a key role would play a key role in my limited liability company. In the local business context, different states have put different qualifications for an organization to work as an agency. There are a number of registered agencies in the local context. Most of the agencies are found within the local context of the state because an agent must be a legal resident of the state in question. In many cases, agents are corporate officers or corporation lawyers allowed to serve as registered agents for other business entities. Besides, a business may embrace a third party as its registered agent (Spadaccini, 2007).
For a Limited liability company that I intend to establish, I will have to establish a credible agency to facilitate the running of the business. I will have to establish funds to hire an agency for my business: this allow the business to run within the local legal framework. In my Limited Liability Company, an agency will play a number of roles within the local business framework to allow the business to operate well. In most jurisdictions, business entities are legally expected to work with registered agencies in order to do business within their borders. In this context, the agency of my LLC will allow my business to satisfy the legal requirement in the local business context (Martin, 2010).
My limited liability companies (LLCs) have substantive (and substantial) liability protections and other tax advantages upon being incorporated. This is opposed to a sole proprietor business. Besides, an agency plays a big role of ensuring that the business operates within the liability protections and tax provisions/advantages of the business (Mancuso, 2012). An agency plays an important role of compliance by ensuring that there is tax compliance by the business and that the business operations are within the liability protections that are allowed in the Limited Liability Companies [LLC's] (Martin, 2010).
The other role of an agency for my LLC will be to provide legal support in areas where the operations of the business are carried out. This will help the organization in evading possible legal suits against it. This also helps the business to avoid cases where the state cannot trace the location of the business or persons involved in the business. The state will also enjoy the complete access of information and carry out follow up with the operation of my LLC (Mancuso, 2012).
In addition, the agency is always responsible on behalf of the government to collect legal documents including tax registration and other documents from my business. The agency will ensure that documents like franchise tax notices and annual report forms have been updated and are taken by the state. Similarly, an agency also has the role of informing my LLC on the 'Good status' standing of the LLC with the state or not. This is important when there is a need to avoid cases where the business is caught unaware with legal suits from the state.
Q2. Identify the advantages and disadvantages of partnerships, limited liability companies, and Corporations
There are many advantages and disadvantages of a partnership, LLC, and Corporate form of business organization. A partnership involves two or more people bound by a partnership deed. A partnership business presents a number of advantages and disadvantages to business proprietors. Various benefits are associated with this form of business. First, this organization fosters consultation and the making of sound decisions relating to the directions to be undertaken. Secondly, it allows a business to establish itself at a cost that is relatively lower than LLC and other companies. Thirdly, a partnership provides room for capital to be shared among the partners who have come together for the business, making start up more ease. It also enjoys a great advantage of creating room for highly experienced employees to be made partners. Finally, this form of business entity has minimal external regulation (Spadaccini, 2007).
On the contrary, a partnership has a number of disadvantages. This begins by the virtue that the liability of the partners concerning the debts accrued by the business is unlimited. This implies that personal property of the partners may be used to pay off debts of the partnership business. Every partner shoulders the partnership debts that may be accrued by the business. Secondly, this form of business faces the high risk of possible occurrence of disagreements among the partners and may lead to challenges in sustaining the partnership. Additionally, a partnership suffers the disadvantage of high dependence among partners on the action of others. In this regard, each partner is liable for the action of other partners (Martin, 2010).
Secondly, there is the Limited Liability Company [LLC] as a business entity. This form of business organization is a new form of business organization. Its advantages include limited liability on the members, especially on the debts of the company. In this form of business organization, personal assets are safe from being used to pay off the debts of the organization. This is because the creditors cannot seize the assets of the owners of the company against the debts of the company. The owners of this company also enjoy fair taxation by avoiding double taxation (individual and corporate taxation). The members of this form of business organization may also enjoy other benefits of health insurance premium deduction on their income tax returns (Mancuso, 2012).
On the contrary, the LLC form of business organization has a number of disadvantages, especially with regard to taxation. These include taxation in the form of 'Taxable Non-Distributed Profits'. In this context, all members of an LLC must pay tax on the corporate profits raised from the business, although they may not share the distribution of the same. In other words, even when members decide not to pull off profits in a given business year, they are liable for taxes on the profit amount. In addition, the managing member of an LLC cannot avoid paying self-employment tax because this tax is still considered as earned income (Spadaccini, 2007).
The third form of business organization is the corporate organizations. Corporate organizations have a number of advantages and disadvantages. The advantages of the corporate form of business organization include the fact that there is a limited responsibility of shareholders with regard to the debts or trials against the corporation. Secondly, corporations can obtain more capital through conducting the sale of their actions. Lastly, the corporate organization of a business permits the deduction of the cost of benefits (benefits package) offered to managers and employees (Martin, 2010).
However, this form of business organization has a number of disadvantages. These include the fact that the process of integration needs more time and money compared to other forms of business organization. Besides, corporations are subject to the rules of entities (federal, state, and local). It is hectic and expensive to comply with all the needs of the stakeholders. Thirdly, the process of incorporating a corporation often attracts high volumes of taxes.
Q3. From your perspective, discuss which of these is the best fit for you, your business, and your Associates. Explain why in your answer.
In my opinion, the best form of business organization that is fit for my organization and my associates is the Limited Liability Company (LLC). This is because of the nature of this form of business organization. First, such a company will fit in my organization by providing security of the personal assets of the business from being held liable in settling the debts of the organization. This form of business organization provides for limited liability upon every member of the LLC, allowing the owners of this organization to be excluded from personal liability against the obligations of the company. Members are liable, but to the extent of the investment that they have made in the business. In fact, the members' personal assets cannot be used to settle the debts of the person (Mancuso, 2012).
Secondly, an LLC is also the best form of business organization due to the taxation benefits that are accompanied by this form of business organization. This form of business organization provides an avenue for all the LLC partners to avoid engaging in double taxation. Unlike other forms of business organization, the company profits are not taxed just like the individual members. In many situations, the profits of the business are not taxed separately. This is unlike other forms of business organizations including the c corporation where profits are taxed and the distributions from it are then re-taxed on the returns of the individuals (Mancuso, 2012).
The other key benefit of an LLC that makes it the best form of business organization is the simplicity of this form of business. Indeed, this form of business is beneficial than other corporations because it is simple to start and run. Unlike a corporation that may require us to establish a board of directors, shareholder's meetings, officers, and regular director's meetings; an LLC does not require this formality.…