What is a Limited Liability Company? - Explained

What is a Limited Liability Company? - Explained


Limited Liability Company types are claimed as the most famous business ownership types in the world. The most number of businesses which are registered in the world are limited liability companies.


What's Famous

Limited liability Companies do have major characteristics what other businesses ownership types like sole proprietary businesses and partnership businesses doesn't have. Limited Liability Company businesses are giving the business owner or owners a hands off situation with the risk, up to a certain extend of the business compared with the sole proprietary businesses and partnership businesses.

Limited Liability Companies do recognized by the legal system as a separate entity from their owners. Due to the reason of considering the business organization as an different entity from their owners, Owners do have to bare any liability as mentioned in the articles of associations which has been submitted to the government registration when registering the business.



Level of Risks

The level of risk towards the business owners by registering the business as a limited liability company is considerably low compared with Sole proprietary and partnership businesses. Due to the level of risk which can be involved when doing business and the business decisions, a business can go bankrupt at any given time. The business could be liable money more than that the business owners invested into business.

In such situations, there could be times where the business needs to repay the amount of cash that owes to other parties. But in such cases the business owners are not liable for any amount which needs to settle to other parties rather than the invested capital to the business.

Due to that the business owners will loose only the amount of cash which has been invested as the capital for the business. Unlike sole proprietary and partnership businesses the business owners will not loose any amount cash to repay any amount of liable cash to other parties.

Benefits

There are major list of benefits which are available for a business entity which has been registered as a private limited liability company or public limited liability company

If a business got registered as a limited liability company, that business have achieved the primary objective to go public and getting listed on a stock exchange. Where the business will be able to sell shares of the company to general public and raise capital for the business. By sharing the business ownership and business risk by multiple channels.

The owner's credit score or credit rating might be affected at the least amount if a business registered as a limited liability company wants to get a business loan from a financial institution.

Since the business is not solely depending on a one business owner, the sustainability level of the business is higher compared to sole proprietary businesses and partnership businesses. Due to the sustainability factors of the business, the company do have the potential to attract the skilled and right attitude employees which can drive the business to a success.

With the limited liability factors which are there towards the business owners, business owners can take risks and try new models to improve and implement good business strategies.