Business Studies

What is Limited Liability Company? Its Advantages and Disadvantages

len Alfred Ajibola - Sat, 18th April, 2020 @ 2:21: PM

Topics in Business Studies

Business Structure: What is a business structure? Advantages and Disadvantages of franchise What is a franchise? Types of franchise What is Corporation? Types, Advantages and Disadvantages of Corporations What is Limited Liability Company? Its Advantages and Disadvantages Partnership in Business: Types, Advantages and Disadvantages Business Studies: What is Business Studies and Business? Management: Elements of Management What is Management? Importance of Management Advantages and Disadvantages of Air Transport Advantages and Disadvantages of Rail Transport Methods of Payment: Cheque - What is a Cheque? Cheque: Types of Cheque Cheque: Characteristics of Cheque Advantages and Disadvantages of Cheque Advertising and Types of Advertising Advantages and Disadvantages of Road Transport Advantages and Disadvantages of Water Transport Consumer Protection - Agencies of Consumer Protection Consumer Right and Protection

Academic Questions in Business Studies

Please check out our Test Your Knowledge page to see all Questions and Answers

An accounting system focused primarily on a balanced debit and credit side is termed _____.

  • A. Ledger system

  • B. Journal system

  • C. Double entry system

  • D. Balance sheet system

  • E. Principle of accounting system

  • F. Balanced accounting system

With regards to money, which of the following statement is incorrect?

  • A. Money is crucial for the survival of every human being

  • B. Money is completely advantageous

  • C. Money is defined as anything that is generally accepted as a medium of exchange

  • D. Monopoly is said to exist when money and wealth exists in the hands of a few

  • E. Excess money in an economy can lead to inflation

  • F. When a person receives money that isn't commensurate with the job he or she had done, then that's underemployment

Which of the following statement is wrong with regards to business?

  • A. Business involves the exchange of something for another thing or money

  • B. Business is an economic activity

  • C. In business, profit goes beyond money

  • D. Businesses do not have social responsibilities to their customers

  • E. The exchange of services is an aspect of business

  • F. Businesses can be affected by government policies

Consumer _____ are the laws and methods put in place by various agencies so that consumers can enjoy maximum satisfaction on the goods they buy and services rendered to them.

  • A. Protection
  • B. Policy
  • C. Rights
  • D. Defence
  • E. Guide
  • F. Safety

Which of the following is not a characteristics of business?

  • A. The buyer and seller must always come into a contract agreement

  • B. Risk from unforseen circumstances is involved

  • C. They are subject to policies made by the government

  • D. All business transaction is aimed at making profit

  • E. It requires a discontinuous transaction between the buyer and the seller

  • F. Investments are required to begin a business

Which of the following is not a Right of Consumer Protection?

  • A. Right to Education
  • B. Right to Choose
  • C. Right to Safety
  • D. Right to the Good things of Life
  • E. Right to be Assured
  • F. Right to Compel

Which of the following is NOT a government agency of consumer protection?

  • A. Ministry of Sports
  • B. Ministry of Commerce
  • C. Consumer Protection Council
  • D. Ministry of Health
  • E. Ministry of Environment
  • F. National Drug Law Enforcement Agent

Define Consumer Protection.



Read more on its smart academic features here

Limited Liability Company (LLC):

The Limited Liability Company (LLC) is one of the business structures. It incorporates the advantages of sole proprietorship, partnership and corporation business structures respectively.

Please read on the concept of a business structure here.

The LLC can be formed by an individual or a group of people who have reached legal agreement on the general management of the business. Those forming the LLC are referred to as members; and one reason why they go into this business structure is based on the fact that each of the members' asset becomes protected when the business (LLC) is sued. For this reason, the risk of each member losing an important asset (for instance, a mansion) is annulled.

Please read on partnerships here.

Note: A limited liability company (LLC) comprising of only one member is termed a single-member limited liability company (single-member LLC) while an LLC comprising of more than one member is termed a multi-member LLC.

A limited liability company can choose its preferred way of paying income tax; but typically, the tax paid applies to each member of the LLC and not the entity itself.

Rather than pay income tax, each LLC member pays their normal tax in addition to the tax derived from their respective profit from the LLC. To achieve this, each member will need to list their business profits and losses on their personal tax returns.

You can read on scale of preference and opportunity cost here.

Advantages of Limited Liability Company

  1. The members of a LLC are not personally responsible for the LLC's debts; thus protecting their assets in the process of a lawsuit.
  2. The LLC's profits are only taxed once since each member pay directly alongside their tax. This process of of being taxed once is known as pass-through taxation.

  3. There is a limited liability (limited financial burden) on the part of the investor since it's limited to each person's investment.
  4. There is freedom in management as there is no need for Board of Directors (BoD) and frequent meetings.
  5. Loans can be easily accessible through a limited liability company.
  6. There is no limit to the number of individuals involved in a LLC.
  7. Compared to corporation, the LLC is quite simple to establish. A single member can even form a LLC.
  8. As a business structure, the LLC is more credible than the sole proprietorship and partnership. For this reason, it is recognized as a more formal business structure.

Please read on the sole proprietorship, its advantages and disadvantages here.

Disdvantages of Limited Liability Company

  1. It can be capital intensive.
  2. Tax fee may be higher.
  3. Depending on the country, there may be strict government laws guiding the LLC.
  4. Cheques made into a limited liability company cannot be cashed directly.
    Please read more on cheques here.

  5. The members of a LLC must have separate records for their LLC business and other businesses which they run alongside the LLC. In short, money generated from other businesses must be kept separate from the LLC account.
  6. The members of a LLC must wait until they receive the schedule K-1 form in order to complete their personal taxes.

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Alfred Ajibola is a Medical Biochemist, a passionate Academician with over 10 years of experience, a Versatile Writer, a Web Developer, a Cisco Certified Network Associate and a Cisco CyberOps Associate.

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Amazing facts in Business Studies

The world's 100 richest people earned enough money in 2012 to end global poverty four times over

NOTABLE POINTS IN Business Studies

Consumer protection refers to the ways or methods through which consumers enjoy maximum satisfaction from the goods they buy and services rendered to them.

The agencies of consumer protection assists in protecting the consumer rights. These agencies may also be referred to as the organs of consumer protection. Basically, we have three of them, they are:

  1. Government Agencies

  2. Independent Agencies

  3. Legislation

Please read on consumer protection here

One of the responsibilities of the government of every nation is to set up agencies or organizations that will protect the interest of the consumers and invariably, the people.

Below are some of the government agencies of consumer protection:

  • National Drug Law Enforcement Agency (NDLEA)
  • National Agency for Food, Drug Administration and Control (NAFDAC)
  • Consumer Protection Council (CPC)
  • Rent Tribunal
  • Ministry of Health
  • Ministry of Commerce
  • Ministry of Transportation
  • Ministry of Environment
  • National Wages and Salaries Commission

Please read on the government agencies of consumer protection here