Thursday, August 5, 2010

Two Main Disadvantages of LLC

Sometimes choosing an LLC as a business form is not always the best choice of entity. It might be better in some circumstances for business owners to choose a corporation or a standard partnership.

  1. One of the main disadvantages of the LLC form of business over the other pass-through entities is that since the LLC is a relatively new entity under many different state laws. The governing law, both tax and nontax, concerning most LLCs is not as well developed as it is with S corporations and partnerships. This could result in some uncertainty with certain transactions. 
  2. Another significant disadvantage of the LLC over the limited partnership form is that a LLC is more likely that an unwanted dissolution of the LLC will occur.  The LLC typically terminates on the death, resignation, expulsion, bankruptcy, or dissolution of any of its members. Again, this could lead to uncertainty with the LLC form of business entity over corporate forms. 

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