Partnership gets formed when two or more individual enter into business together. As a result partnership is an easy entity to setup. In the formation of partnership, there are lawful needs for registration apart from registration with the county of the business name. On the other hand, Limited Liability Company is a separate and distinctive officially permitted entity. Therefore, to form a limited liability company the owner of the business should file official articles of organization with their nation’s limited liability company filling office and meet with the terms of other nation filing needs. By contrast, members who form a partnership do not require filing any official paperwork or paying any particular fees.
On the obligation of debts, in partnership the members are liable of the debts of their business. Members of partnership are not protected from the liability of their debts. On the other hand, the members of Limited Liability Company do not have any obligation to the debts that their company owes the creditors. Therefore, if a partnership business run bankruptcy, the creditors have the right to sell the properties of the members of the partnership to recover their debts which is not allowed in the Limited Liability Company.
The functioning and organization of Limited Liability Company and partnership can get administered through mutual agreement. Both members of partnership and Limited Liability Company can embark responsibilities to each other to perform, or desist from performing, one or more defined deeds. A mutual agreement in both partnership and Limited Liability Company can be in writing or oral. For instance, in a company of two members they can agree that one member to run the business and he or she gets remunerated while they share the rest of the profit.
Dissolution of partnership gets done without any lawful formalities apart for the filing final tax return. Therefore, dissolution of the partnership can be as a result of withdrawal of one member, or death among others. On the other hand, dissolution of Limited Liability Company needs lawful formalities. For a Limited Liability Company to get terminated certain lawful and tax formalities need to get followed. As a result it is easier to terminate a partnership than to terminate a Limited Liability Company.
In taxation procedure, both Limited Liability Company and partnership are almost identical. In both partnership and Limited Liability Company, the members on their personal tax returns report business income or losses. In this case the business does not make any payment of tax on this money. Actually, with the Internal Revenue Service, both Limited Liability Company and partnership file an identical informational tax return. Additionally, both the Limited Liability Company and partnership distribute identical programs to the business’s members. The program lists each member of both the Limited Liability Company and partnership share of income.
From the comparison it is clear that Limited liability Company is a better prefer compared to partnership. Though, in the formation process if needs legal procedures that might take long to fulfill, once formed its advantages particularly to the members out ways the disadvantages. However, this gets displayed on the features of the Limited liability Company where the members enjoy limited liability and personal assets protection.