Limited Liability Corporation and Limited Liability Partnership - Essay Example

The members may choose to file taxes through sole proprietorship or partnership, S corporation, or C corporation, allowing for the maximum benefit at tax time. There is considerably less paperwork to running an L.L.C. than a corporation and can be designed with only one member. The disadvantages of an L.L.C. are that raising capital, attracting credit and investors may be difficult because of the nature of the financial shielding.

Members may still have to personally guarantee the obligation of the company. Many states require a fee to be paid annually in order to retain the privilege of running the L.L.C. The unfamiliarity of the nature of the structure may create some difficulties when forming business relationships. In a limited liability partnership, each partner is limited from the misconduct or negligence that might be committed by a partner. Therefore, what one partner agrees to does not obligate the other partner or partners.

This protection allows partnerships to form without putting them at risk for behaviors that are outside the scope of the intent of the partnership. This is used for professional relationships when the function of a partnering relationship, say as a lawyer or accountant, is limited to a specific aspect of the business without control or input on other aspects. A disadvantage of this formation is that any partner may enter into an agreement or create an obligation without the other partner or partners being involved.

The main difference between an L.L.C. and an L.L.P. is that the first shields the individual member’s finances from the obligations of the business, while the second shields the partners from the actions of each other. 

In using this analysis for an investment opportunity, one may find flaws in the way that a mathematical model has been used as a predictor in order to prevent the gaps from affecting the eventual outcome of the investment. A scenario analysis creates a prediction of possible future events in order to assess the action. This sets up an equation that basically states that if this, then that, that, or that could be the possible outcome.