Advantages - Disadvantages of Limited Liability Company. Business Plan

Domestic Business Plan
Name
Institution
Domestic Business Plan
Executive Summary
The proposed business is the United Party Rentals Company, which is a party rental company that will be located in Florida, U.S.A. The location of the business in the Southeast part of the United States is very convenient because the region is the most populated in the country with a large number of households. This therefore means that the demand for rental supplies is great in this area for both social and corporate events hence confirming the availability of a ready and steady market that is needed in order for the business to succeed. The proposed business will largely deal with the supply and renting out of party tables, chairs, inflatable bouncing houses, tents, public address system, canopies and other party items. The company will rent its party materials to wedding functions, banquets, corporate events, birthday rentals and other related events. The United Party Rentals is structured as a company. The company’s main aim is to provide the best services and quality party products to its customers in Florida at a good price that will make the customers happy and excited to seek more of the company services in future. Based on the company’s strategic position in Southeast and the fair pricing, there is no doubt that the future of the United Party Rentals Company appears bright.
Type of Business Entity
The type of business entity that is best for the United Party Rentals is a limited liability company (LLC). As the name suggests, this type of business entity shields the members and owners of the business from liabilities. An LLC has an operating agreement that safeguards the operations of the company. A limited liability company is distinguished by its having a separate legal entity from its members. This means that an LLC is able to take part in hiring employees, buying and selling of property and retaining attorneys to defend the company against any claims it is facing (Shulga, 2013). The withdrawal of any member cannot affect the operations and running of the company. The members of a company also have limited liability meaning that in case the company has any debts, the personal properties of the members cannot be taken to repay the debt but instead this remains to be the company’s responsibility. A limited liability company can dissolve due to bankruptcy or in the case where a partner dies. In terms of membership, an LLC requires a minimum of two applicants in order to exist and the partners are the owners of the company. There is no maximum number of members for LLC’s and this type of entity equally enjoys flexibility in choosing the management of the company. The Articles of Incorporation is a legal document that is required in the formation of a limited liability company and it usually includes the full names, addresses and identifications of the partners forming the business. The shares given by each partner act as the source of capital for the company and the shares could be in form of money, assets or work. The fact that the personal assets of the members are protected, and that the business entity is flexible, it makes the limited liability company suitable for the United Party Rentals Company.
Advantages and Disadvantages of Limited Liability Company
The mentioned features above make the LLC an appropriate choice for the proposed party rentals business. Aside from these however, the LLC’s have other major advantages as compared to the other types of business entities. To begin with, LLCs enjoy limited liability just as the name suggests. This means that in case the company has creditors, the personal assets of the members cannot be taken to repay the debt because they are protected from personal liability. This case is unlike the one for the general partners and proprietorships where personal assets such as savings accounts and houses belonging to the owners are pursued in order to pay the business debts. In addition, this type of business entity in Florida enjoys the benefit of pass-through taxation. This implies that the profits or losses shares of the individual members are reported on the members’ tax returns thereby eliminating the cases of double taxation that is common with corporations. LLCs also enjoy a lot of flexibility in terms of membership whereby the number of individuals allowed to form a company is not restricted. The same case is true in the structuring of the administration or management whereby there are no restrictions in how the management should be formed. The distribution of profits is also flexible in Florida LLCs. The other advantage is that corporate minutes and resolutions are not required in this type of entity, which makes the management of such a business easier.
Even with all these advantages, the LLC equally has some disadvantages. For one, the start-up and ongoing fees required in the formation of LLC is relatively expensive compared to other entities such as the general partnerships and proprietorships (Schwidetzky, 2018). The ownership transfers are not flexible in LLC and it is usually harder for members to transfer their ownership unless all members approve the transfer in the LLC’s operating agreement. In Florida and in most other states, the LLC is still quite new and therefore the case law available is not much to offer adequate protection to the members. The advantages of LLCs outweigh the disadvantages therefore making it an appropriate choice for the proposed party rental business in Florida.
Steps in Formation of LLC
The formation of a limited liability company in Florida follows some specific legal steps as outlined in Chapter 605 of the Florida Revised Limited Liability Company Act. The first step is the selection of a name for the LLC. According to the Florida statutes, the words “Limited Liability Company” must be included in the chosen name or its abbreviations of LLC or L.L.C. There must be a difference between the chosen name and those of existing businesses. Following this, the name of the proposed business will be United Party Rentals LLC. The next step is the appointment of a registered agent who in the event of the company being sued accepts the service of process. The registered agent is also responsible for accepting the company mail on behalf of the LLC. The third step is to file Articles of Organization, which is done at the Florida Division of Corporations. In filing, a certain fee is paid and it includes information such as the name and address of the LLC, the name, address and signature of the registered agent, the purpose of the LLC, and lastly the names and addresses of the people that will be managing the LLC. After this step, the LLC is then required to create a legal document known as the Operating Agreement. The document governs certain issues including the relations between members and the relations of the members to the LLC. It also governs the managers’ rights and du...