What are the main features of a traditional corporation? What are the main featu

Question

What are the main features of a traditional corporation? What are the main features of a Limited Liability Company? What are the similarities and differences we can look to when trying to determine which entity will best suit our needs in a given situation? In the context of entity selection, discuss the main features of these two entities and compare the liability that a corporation would be exposed to as it relates to shareholders/owners of a corporation as opposed to the members of a limited liability company (LLC). Would your choice change if the situation involved an act of fraud? Why or why not?

Explanation / Answer

a.

1. A Traditional corporation is a separate legal entity which has own rights and obligations. The business is separate from its owners who are called stockholders. The corporation is liable for taxes but not owners.

2. The business of corporation is run by employee appointed by Board of directors. Stockholders appoint a board of directors. It has continuity of life the sale of stock, death of a stockholder, or inability of an employee to function does not impact the continuous life of the corporation.

3. The Corporation has limited liability it means that liability of stockholders is limited to the amount each has invested in the corporation stock.

4. A person who buys stock in a corporation is called a stockholder and receives a stock certificate indicating the number of shares of the company she/he has purchased. These Stocks are transferable to anybody whosoever is interested to buy the stock. A person can sell and buy stocks from the stock market whenever he/she wishes to.

b.

A Limited Liability Company, also known as an LLC, is a type of business structure that combines traits of both a sole-proprietorship and a corporation. The features are as follows:-

1. Limited liability is a feature describing an amount invested in a company. Shareholders can claim ownership up to the amount they have invested in a business.

2. The Limited Liability Company can be formed with one member only, and the member can be a whole company.

3. The decision making for the company rests with the Managing member of the Limited Liability Company so there is no need for regular meeting of the board members.

4. LLCs have the freedom of selecting any form of profit distribution, which does not have to be in the ratio of the ownership between different members

Related Questions

Navigate

• Browse (All)
• Browse W
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.