Question

“In the context of three co-founders looking for equal ownership and management of a business, the limited company is superior to the partnership structure. Furthermore, the limited company provides limited legal liability, whereas in a partnership all partners are liable for all the debts of the partnership.”

To what extent do you agree or disagree with the above statements?

Answer 1

A PARTNERSHIP IS A TYPE OF BUSINESS WHERE TWO OR MORE INDIVIDUALS SHARE THE OWNERSHIP. A LIMITED LIABILITY COMPANY IS ALMOST SIMILAR TO A PARTNERSHIP BUSINESS AND DIFFERS ONLY IN ASSET PROTECTION OF THE OWNERS.

IN A PARTNERSHIP FORM OF BUSINESS ALL THE PARTNERS ARE LIABLE TO PAY 100% OF THE DEBT THAT THE BUSINESS HAS. BUT IN A LIMITED LIABILITY THE OWNERS ARE COVER UNDER LIMITED LIABILITY PROTECTION. WHICH MEANS THEIR PERSONAL ASSETS MAY NOT BE USED TO COVER THE BUSINESS' DEBTS.

WHEN THREE CO FOUNDERS ARE LOOKING FOR EQUAL OWNERSHIP AND MANAGEMENT OF A BUSINESS THEN LIMITED LIABILITY IS BETTER THAN A PARTNERSHIP BUSINESS SINCE ALL THE MEMBERS ARE EQUALLY IMPORTANT IN A LIMITED LIABILITY COMPANY WHEREAS IN MANY FORMS OF PARTNERSHIP BUSINESS SOME PARTNERS DO NOT GET EQUAL IMPORTANCE OR MANAGEMENT RIGHTS. MOREOVER AS STATED ABOVE A LIMITED LIABILITY COMPANY IS ALWAYS SAFER THAN A PARTNERSHIP AS THE PERSONAL ASSETS OF THE MEMBERS ARE NOT AT RISK.

THUS I WILL AGREE TO THE STATEMENT THAT A LIMITED LIABILITY COMPANY IS SUPERIOR TO A PARTNERSHIP FORM OF BUSINESS.