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Advantages of Limited Liability

In the event of bankruptcy or a business being sued, the personal assets of such merchandise are at risk if the firm has unlimited liability. For Part, reviewing the company and its unlimited liability and protecting its assets is essential. It is critical to separate personal assets from the businesses. Pat, in this case, having unlimited liability would mean that he can lose his assets, such as the Justin Bieber memorabilia, car, and even the house (CT Corporation Staff, 2020). I encourage the entrepreneur to transform the company into a Limited Liability Company (LLC). Many merits may come along with it despite protecting his assets. This paper, therefore, presents the advantages and the requirements for forming a Limited Liability Company.

A Limited Liability Company’s primary goal is protecting and separating personal assets from the business. As a result, in case clients identify faults in the product or service delivery; they can take legal steps such as suing the business. Such occurrences may subject Pat to loss of personal assets as they are seized. Therefore, the protection of personal assets is guaranteed by a Limited Liability Company.

Having a Limited Liability Company may also provide Pat with flexibility in terms of the structure of the business. The management of a Limited Liability Company mainly depends on its owners, including members or specific managers. Furthermore, being a corporate or sole proprietorship, the business is more flexible to taxation. Pat can quickly identify the most suitable tax status for his business and personal assets (CFI Team, 2022). The flexibility of having a Limited Liability Company would mean that Pat has income flow treated as the owner’s income. This helps avoid instances of double taxation. Double taxation in this context means being subjected to taxes on dividends distributed to the company owners and at the corporate level. Therefore, having established a firm under Limited Liability terms help avoid such adverse events around taxation.

To create a Limited Liability Company in Wisconsin, Pat must take the crucial step of selecting the most appropriate name for the company. This is the first step for Pat. The name should be unique. After identifying the company’s name, Pat must file Articles of Organization alongside the Wisconsin Department of Financial Institutions. The article of the organization is a document that will supply Pat with information such as the business and members’ names and addresses. The filling process can be done using the Wisconsin Department of Financial Institutions online platform (CT Corporation Staff, 2020). The law will then require Pat to pay some legal fees before developing an operating agreement for the firm. The operating agreement document shows important information, such as how the business will be operated and managed. It also highlights the criteria for sharing business profits and losses among the company members. The operating agreement, therefore, stipulates how the earnings and taxes are distributed in the partnership formed. Therefore, members play an important role in common interests while agreeing on the operating agreement—the bylaws of a corporation and operating agreement function similarly.

In conclusion, having established a Limited Liability Company comes with tremendous benefits. It ensures the owner’s property is safe if the business is sued. Such events incur business owners high costs as the law may require them to pay fines or compensate. It is, therefore, important to separate business assets from the business. Doing so makes one flexible in choosing the most suitable tax status for their property. Besides, running and managing such business ventures becomes more accessible and flexible. The legal procedures required while forming a Limited Liability Company are simple. For Cupcakes-Palooza, Pat may be necessary to choose a name that can be registered as a Limited Liability Company. After doing so, Pat may visit the Wisconsin Department of Financial Institutions website and file the Organization’s Article. The document should provide relevant information pertaining to the business, its name, members, and their addresses. Having all this, with legal fees, Pat is good to go!


CFI Team. (2022). Limited Liability Company (LLC).

CT Corporation Staff. (2020). Benefits of Forming a Limited Liability Company (LLC).


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