Dean and Sam want to enter into business with their buddy Bobby. Bobby has the m

Question

Dean and Sam want to enter into business with their buddy Bobby. Bobby has the money to invest and Dean and Sam have the ability to do the work and invest sweat equity. Bobby wants to limit his liability as much as possible to protect his personal assets. Dean and Sam want as much control and management responsibilities as possible. What are 2 types of business structures that they might use for their business that satisfies their goals? What are the advantages and disadvantages to those structures?

Explanation / Answer

If they want limited liability of personal assets and better control on management then they can go for below types of business organization structure:

Limited Liability Company or limited liability partnership:

Both an LLC and an LLP help business owners limit their personal liability. In both types of businesses, owners may lose the money they've invested in the company, but their personal assets aren't at risk if the business or a co-owner is sued. An LLP operates like a general partnership, but with liability protection for its partners. This means that, by default, the partners share equally in decision-making and management, and each partner has the power to bind the company to contracts. Partners also equally share profits and losses. LLCs can be managed by the members, or they can be managed by a group of managers, with the non managing members acting in an investor role. Many small, informally-run businesses choose LLCs because of this flexibility in structure and management. LLCs and LLPs both offer liability protection for owners.

LLP formation paperwork requires more detailed and specific information than LLC formation documents. LLPs also may face greater restrictions on their ability to do business in states other than the one where they were formed. LLCs can generally do business in other states, so long as they file foreign business registration documents in those states.

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