INTRODUCTION

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.

Limited liability means that the company is a separate legal entity to its owner or owners. The

company as an 'individual' can own assets, equipment, or offices, and is responsible for its own

financial losses and debts. The company is a separate entity from its shareholders and it is only

responsible for the money that it owes. Limited liability is the opposite of unlimited liability.

Advantages of Limited Liability Company

There are many advantages to being a limited liability company. Some of the key advantages are:

i. Owners are not personally responsible for the losses and debts of the company - limited

liability.

ii. The company is a separate legal entity.

iii. No restriction on the number of owners.

iv. Easier access to capital and resources (compared to a sole proprietorship).

v. The business can raise finances through share capital.

vi. Flexibility when it comes to company management.

vii. The potential to benefit from economies of scale (lower per-unit cost as production

increases).

viii. Liability protection for business owners and shareholders

ix. personal assets are protected

x. legal protection from the effects of other people’s mistakes

 xi. flexible business structure with a variety of trading options

xii. corporation tax rates are lower than income tax rates

xiii. because the company is independent of its owners, it can be sold or passed on

Disadvantages of Limited Liability Company

i. It is expensive to set up if the company is just starting.

ii. It also takes longer to set up due to the formal company registration process.

iii. Taking care of accounting and taxes is more complicated for a limited liability company

than for certain other forms of business.

iv. The company must pay shareholders dividends. It cannot keep all the profits it makes.

v. The interest of shareholders and owners could differ, leading to issues with the long-term

outlook of a business.

vi. Takeovers are also a possibility for public limited companies, which can lead to a loss of

control for the current owners.

vii. company accounts will be made public

viii. owners don’t have as much control when compared to sole traders

ix. accounts are more complicated, meaning that you’ll likely need an accountant

x. limited partnerships may place a barrier on how much profit can be retained

REFERENCES

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Johnston, Kevin. (2019). "What Is the Difference Between a Shareholder Vs. a LLC Member?".
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