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Partnership, Limited Liability Companies, and Gearing - Assignment Example

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"Partnership, Limited Liability Companies, and Gearing" paper discusses the difference between partnership as an organization and limited liability company, analyzes the sources of finance both short and long term, and explains gearing and how different sources of finance can impact on gearing…
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Partnership, Limited Liability Companies, and Gearing
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Download file to see previous pages Following are the differences between a partnership and Limited Liability Company based on formation, sources of funds, taxation and dissolution of business

Formation: A partnership is created with two or more people and there is no concept of one-person partnership. On the other hand, a Limited Liability Company can be started from one member-only and the law does not require members to be the resident of the state where the LLC is being formed (Mancuso).

A partnership can be inexpensive and easy to create as no filings are required and no fees are associated with it. On the other hand, LLCs are expensive to create and for the protection of the business name, the trade name is registered and a legal fee is paid (JPEC Org). The nature of formation is the primary difference between the two forms of organizations. The formal paperwork is very important in the case of limited liability and the owners are liable to fulfill the filing requirements of the state whereas, a partnership can be formed by just shaking hands.

Sources of Fund: The capital required to start a partnership business is shared by the partners of the business. The share of each partner may vary and based on the share of capital, the profit and loss are shared in partnership. On the other hand, in limited liability companies, funds usually come from external sources including both the short term and long term funds. However, the owners of the business also share their capital to start a limited liability company. In short, sources of funds in the partnership are only internal sources and very few partnerships get able to take bank loans and other external finances whereas; the sources of funds in a limited liability are both the internal and external sources.
Taxation: In partnership as an organization, the income of each partner is subject to taxation. The partnership is not considered separate from its owners when taxes are imposed and each partner pays his share of tax and reports individually on the federal tax return. ...Download file to see next pagesRead More
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