FIN 419 week 1 DQ's 1 - 7649

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What is a limited liability corporation?

What is a limited liability partnership?

What are the differences?

 

 

What are the advantages and disadvantages of each?

What is a sensitivity analysis?

What is a scenario analysis?

 

How would you apply each one to a potential investment opportunity?

How would you use the information from this analysis? Explain.

What are some risk management techniques?

How would you use portfolio management to assess the risk and return of an investment?

Predict how the results would be different based on different risk preferences?

Based on your assessment of risk using portfolio Management, what factors would you use to make different risk preferences?

Solution Description

A limited liability corporation (LLC) limits the personal liability of the owners for debts and actions of the LLC. “…the LLC gives its owners, like those of S corps, limited liability and taxation as a partnership” (Gitman, 2006, p. 8).

A limited liability partnership (LLP) provides limited liability to individual partners from certain partnership obligations. “All LLP partners have limited liability. They are liable for their own acts of malpractice, but not for those of other partners”. (Gitman, 2006, p. 8).

An LLC, unlike an S corp, can own more than 80% of another corporation, and corporations, partnerships, or non-U.S. residents can own LLC shares. The LLP is taxed as a partnership. What they have in common is that their owners enjoy limited liability, and they typically have fewer than 100 owners.

The advantages of a limited liability company (LLC) and a limited liability partnership (LLP) are similar; however these two types of business organizations are different.

 

LLP's do not have the corporate procedures of annual meetings and minutes. With regard to taxes, the LLP is not a separate taxable entity, but instead the profits pass through to the partners who pay for them as income tax.

 

An LLC can elect to be taxed as a sole proprietor, partnership, S corporation or C corporation (as long as they would otherwise qualify for such tax treatment), providing for a great deal of flexibility.

 

Disadvantages include: Any partner without the other may bind the LLP. Money and property contributed to the LLP becomes owned by the partnership unless otherwise stated and the contributor is not entitl