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Mathematics with Business Applications6th EditionMcGraw-Hill Education 3,760 solutions When starting a business, a business owner must first choose which type of entity to create. Two of the most popular entity types are the limited liability company (LLC) and the corporation. Choosing between these two types of entities can be difficult for business owners who are not familiar with the unique features of each type. To choose the right one
for your business, you should be aware of their similarities and differences. Similarities Limited liability companies and corporations are types of legal business structures—ways to legally organize a business under state law. Both of these legal structures provide limited liability. Limited liability means that a person or entity’s legal, and therefore financial, liability is limited. Owners are protected more under limited liability structures because they are not personally
liable for the business’s liabilities or debts, although there are some exceptions. The objective of choosing an entity that provides limited liability is to protect business owners’ personal assets from being reached in lawsuits against the business or by the business’s creditors. LLCs and corporations both also require documentation to be filed with the state government at the time of formation. A fee to register the business entity must accompany the filing. Differences
Despite significant similarities, LLCs and corporations also have several distinguishing characteristics. The LLC is a newer entity structure and provides more flexibility than the corporation. However, LLCs often mimic corporations in their planning and legal documentation to some degree. Here are some of the key differences between these two entities:
What does it mean when people who own stock in a corporation have limited liability?Limited liability means that the owners' personal assets are not at risk if the company fails, is sued by its creditors, or is sued for other alleged wrongdoing. The owners can only lose up to the amount of money that they have invested in the firm.
What does it mean when a business has limited liability?A limited liability company (LLC) is a business entity that prevents individuals from being liable for the company's financial losses and debt liabilities. In the event of legal action or business failure, liability is assumed by the company rather than its constituent partners or shareholders.
What does limited liability mean for stockholders quizlet?What does limited liability mean? Limited liability means that corporate owners (stockholders) and limited partners are responsible for losses only up to the amount they invest. Their other personal property is not at risk.
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