Suppose that Anna and Grace want to start a business to market a new food product...

Suppose that Anna and Grace want to start a business to market a new food product they have invented. Limited Liability is important to them because of the potential product liability problems associated with manufacturing and selling food products. Initially, Anna and Grace will be the only investors, and they may not see a profit in their business for a few years. What types of business organizations are available to Anna and Grace? What type of organization would you suggest? Why?

Expert Solution

Anna and Grace want to start a business with a limited liability with the fact that they would be the only investors in the business.

Since they do not intend to include any furthur individual or investor in their business as of now, it is better if they form limited liability partnership (LLPs) and not general partnership. They could have also started corporation or a company but that would have required more funds and investors.

In LLPs the liability is limited as against in general partnership where the liability is unlimited .Since we are given that liability should be Limited LLP should be preferred .

Also it is easy to start and set up a partnership as compared to a firm or a corporation limited funds are required in this form of business.

LLB is also preferred in this case because they think that the organisation would not Incur profits in the initial few years so having a General partnership would mean unlimited liability and hence they would be liable to pay for the losses of the business from the personal account.

Hence keeping all these factors in mind it is better for Anna and grace to start a limited liability partnership so that they can run their business efficiently

(You can comment for doubts)

Rahul Sunny answered 2 years ago

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