Limited liability is a way to make sure that a person who is engaging in business does not risk his or her personal possessions in case the business fails. In other words - you risk what you put in.
The best way to explain limited liability is this - you risk what you put in.
?In other words, limited liability is a way to make sure that a person who is
engaging in business does not risk his or her personal possessions in case the
business fails. ?Any investor, partner, or member of the company that by law has
limited liability cannot be made responsible for any unfulfilled company
obligations and debts that are more than the amount that the person has
invested.?
Here is a simple comparison. ?Jack and Jill are friends. ?Jack is
a handy guy and Jill is a great cook. ?To earn money from their talents, both
start their own business. ?Jack earns his living by doing renovations. ?He
bought his own equipment and simply advertises his services under his own name.
?Jack is a sole proprietor. ?
Jill decided to open a bakeshop. ?Before going
into
business [url=http://www.bvbfanshopdortmund.de/marco-reus-bvb-trikot.html]Marco
Reus Trikot[/url] , however, Jill has formed a small corporation (an
S-Corporation), called Jill's Cakes, Inc. ?Jill invested her savings into Jill's
Cakes, Inc. as a starting capital and then bought her baking equipment and
leased her shop on behalf of her corporation. ?So long as things go well for
Jack and Jill there are almost no differences between the two ways of doing
business. ?
As soon as things turn sour
though [url=http://www.bvbfanshopdortmund.de/mario-gotze-bvb-trikot.html]Mario
Gotze Trikot[/url] , the differences become apparent. ?One day, Jack mopped the
floor right before leaving the apartment he just painted, but forgot to put up a
sign. ?The owner walked in, slid on the wet floor and broke an ankle. ?He is
suing Jack for medical expenses and lost wages. ?Jill accidentally dropped a
peanut in a wrong batch of batter and caused a severe allergy attack in one of
her customer. ?That customer is suing her for medical bills and pain and
suffering. ?
What is at risk for Jack and Jill? ?Jack is risking everything
he owns - his work equipment, his
truck [url=http://www.bvbfanshopdortmund.de/...ncho-bvb-trikot.html]Jadon
Sancho Trikot[/url] , his house, his personal belongings. ?So long as there is a
judgment against him, Jack must sell anything he owns to pay it. ?Jill is
risking only her business assets - her cooking equipment, her cash reserves, and
anything else owned by Jill's
Cakes [url=http://www.bvbfanshopdortmund.de/...aney-bvb-trikot.html]Thomas
Delaney Trikot[/url] , Inc. ?But her personal things, such as her car and her
apartment, are safe. ?Her business may become?bankrupt, but her life will not be
destroyed. ?
Of course, this story describes a worst case scenario. ?Many
businesses prosper without many troubles. But many also
fail [url=http://www.bvbfanshopdortmund.de/...kimi-bvb-trikot.html]Achraf
Hakimi Trikot[/url] , and it is so easy for a business owner to take advantage
of limited liability that everyone should do it. ?
Several types of business
entities offer their owners the protection of limited liability. ?The most
popular are corporation and limited liability company (LLC). ?Each of these
entities has its own advantages and drawbacks, but both offer their owners
limited liability protection. ?
A few things are important to remember in the
context of limited liability. ?First, a company must be properly maintained in
order to offer full liability protection that it is designed to offer. ?In
short, if a company is only a company in name, but is run as if it is one and
the same with the person running
it [url=http://www.bvbfanshopdortmund.de/...allo-bvb-trikot.html]Abdou
Diallo Trikot[/url] , the courts will consider it a sham, and will not afford
the owners limited liability protection. ?
Second, even in a limited
liability business an owner may be responsible for amounts beyond his or her
investment. ?This is the case when an owner has personally co-signed a debt
agreement (such as a credit card application). This signature gives the lenders
a personal guarantee of repayment of that debt and in the case of default they
can go after the owner's personal assets. Other owners of the company (or
investors) would not be liable if complete repayment is beyond the resources of
the business, but the owner who had done the co-signing would be responsible for
that amount.
Further, in some professions it is impossible to reap the
benefit of limited liability. ?Professionals like
lawyers [url=http://www.bvbfanshopdortmund.de/...adou-bvb-trikot.html]Dan-Axel
Zagadou Trikot[/url] , doctors, accountants, chiropractors, engineers, or
architects are prevented by law and ethics from limiting their liability. ?We
want these professionals to be personally responsible for their decisions so
that they always make the decisions carefully.?
The bottom line
is [url=http://www.bvbfanshopdortmund.de/roman-burki-bvb-trikot.html]Roman Burki
Trikot[/url] , anyone doing business should consider taking advantage of a
limited liability entity, if at all possible. ?Consider it an insurance against
your worst case scenario.
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Copyright (c) 2008 Tod A Dale
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