Comparison Between the Limited Liability Company and the Limited Partnership
Business Law Comparison between The Limited liability Company And The Limited Partnership The Limited Liability Company Definition A limited liability company (LLC) is a flexible form of enterprise that blends elements of partnership and corporate structures. It is a legal form of company that provides limited liability to its owners in the vast majority of United States jurisdictions. LLCs do not need to be organized for profit.
Often incorrectly called a “limited liability corporation” (instead of company), it is a hybrid business entity having certain characteristics of both a corporation and a partnership or sole proprietorship (depending on how many owners there are). An LLC, although a business entity, is a type of unincorporated association and is not a corporation. The primary characteristic an LLC shares with a corporation is limited liability, and the primary characteristic it shares with a partnership is the availability of pass-through income taxation. It is often more flexible than a corporation and it is well-suited for companies with a single owner.
Legal Capacity In this case the capital of the company will be divided into equal parts, the value of each part is not less than L. E. 100. Accordingly, every partner has to contribute to the capital of the company. Contributions to the capital are not represented by shares but by parts. These parts are not negotiable such as the case of shares. So, as per the law provisions (part 4 of the Companies Law), the foundation of a limited liability company, or increase of its capital, is not permissible through public subscription moreover, the issuance of negotiable shares is not allowed.
Similarly, as in the case of the Partnerships Limited by shares, the Limited Liability Companies are not allowed to undertake insurance, banking, savings, taking of deposits or investment of funds to the account of other parties. Management The liability of each partner towards the company is limited to the value of his part as contributed to the capital of the company. Thus the partner does not acquire the legal status of a merchant. Partners This company is founded by a limited number of members (partners) which will not exceed fifty persons.
The partners seek to select each other on trustworthiness basis. So this company can be a suitable shape for the members of a family who intend to join hands to carry on business. Name of the Company It is worth mentioning that, the title chosen for this kind of companies, as ”Limited Liability Company” does not in fact represent its legal position. It is only the liability of the partners which is limited to the value of their parts, but the company’s liability itself is not limited. The company should adopt a particular name which may be derived from its purpose of business.
The name may also include the name of one or more of its partners. The name of the company has always to be followed by (?.?.?.? ) meaning ???? ??? ??????? ?????? such as ???? ??? ??????? “” | ???????? ?? ????? ?????? ??????? ??????? ??????? ????? ??????? ?? ???? ???????? Representation of the Company It is important to understand that limited liability does not imply that owners are always fully protected from personal liabilities. Courts can and sometimes will pierce the corporate veil of corporations (or LLCs) when some type of fraud or misrepresentation is involved. The Limited Partnership Definition
A limited partnership is a form of partnership similar to a general partnership, except that in addition to one or more general partners (GPs), there are one or more limited partners (LPs). It is a partnership in which only one partner is required to be a general partner. Legal Capacity The general partners are, in all major respects, in the same legal position as partners in a conventional firm, i. e. they have management control, share the right to use partnership property, share the profits of the firm in predefined proportions, and have joint and several liabilities for the debts of the partnership.
Management As in a general partnership, the General Partners have actual authority as agents of the firm to bind all the other partners in contracts with third parties that are in the ordinary course of the partnership’s business. As with a general partnership, “An act of a general partner which is not apparently for carrying on in the ordinary course the limited partnership’s activities or activities of the kind carried on by the limited partnership binds the limited partnership only if the act was actually authorized by all the other partners. Like shareholders in a corporation, Limited Partners have limited liability, meaning they are only liable on debts incurred by the firm to the extent of their registered investment and have no management authority. The GPs pay the LPs a return on their investment (similar to a dividend), the nature and extent of which is usually defined in the partnership agreement. General Partners thus carry more liability, and in cases of financial misfortune, the GP becomes “the generous partner”. Limited partnerships are distinct from limited liability partnerships, in which all partners have limited liability.
Partners This company is formed by two kinds of partners. The first kind is the joint liability partners (Article 19 of the previous Trade Law 1883), who have the same legal characters as the partners of the simple partnership, and thus they have the legal title of merchants and are jointly and severally liable for the company’s debts. The second kind of partners, are those who own funds in the capital of the company but are kept away from the management of the company which is reserved only for the jointly responsible partners.
This second kind of partners which is known as the ”sleeping” or ”dormant partners” or ”limited partners” are not liable for the company’s loss except within the limits of the capital they paid, and they naturally will not acquire the title of merchants. Name of the Company The name of the partnership may take the name or names of the joint partners who have unlimited liability. In case that one of the sleeping partners requests his own name to be included in the partnership name, he will become fully liable for the debts of the company in the same manner as the joint liability partners.
Representation of the Company It is worth to note that the nature of the moral personality enjoyed by a company is in fact a fiction created by law for the facilitation of legal dealings between the company and other parties. This artificial nature of a company’s personality means that it cannot have intent or express its will. So, there is a real necessity to have natural persons to carry on the company’s activities on its behalf. In the case of the Limited Partnership, the managers will represent the company.