What is a limited liability company (LLC)? advantages and disadvantages

Limited Liability Company (abbreviated: LLC) is a type based on the legal form of an enterprise under the law.

What is limited liability company (LLC)

Limited Liability Company in English is Limited Liability Company, abbreviated LLC.

According to the Enterprise Law 2014 stipulates: A limited liability company (LLC) is a type of enterprise with legal status and recognized by Philippines law. In which, the company is a legal person and the owner of the company is a natural person will have the rights and obligations corresponding to the ownership of the company, these are two separate legal entities (According to the provisions of the Ministry of Finance, civil law).

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See also: What is the financial market? Some popular trading methods?

Classification of limited liability company

According to the provisions of the Enterprise Law 2014, there are two types of limited liability companies, namely one-member

limited liability companies and limited liability companies with two or more members.

One member limited liability company is an enterprise owned by an organization or individual (hereinafter referred to as the company owner); The company owner is responsible for the company’s debts and other property obligations to the extent of the company’s charter capital.

One member limited liability companies have legal status from the date of issuance of business registration certificates by competent authorities, one member limited liability companies are not entitled to issue shares but are allowed to issue bonds. (Article 73 Enterprise Law 2014)

Points to pay attention to distinguish between a private enterprise and a one-member limited liability company as an individual:

      One member limited liability                    company is an individual                 Private enterprise
Responsible only to the extent of  charter capital of the company Be responsible with all your assets for all activities of the business
It is clearly stated that it has legal status from the date of issuance of the business registration certificate             has no legal status

 

A limited liability company with two or more members is an enterprise in which: Members can be organizations or individuals; the minimum number of members is 2 and does not exceed 50; Members are responsible for debts and other property obligations of the enterprise within the amount of capital committed to contribute to the enterprise.

A limited liability company with two or more members has legal status from the date of issuance of the business registration certificate, and a limited liability company with two or more members is entitled to issue bonds, but is not entitled to issue shares. (Enterprise Law 2014)

Advantages and disadvantages of limited liability company

From the characteristics of a limited liability company, the advantages and disadvantages of this type of company can be given as follows:

Advantages of limited liability company

– There are more owners than Private Enterprises, so the ability to have more capital, so financial advantages will create growth for the business.

– Comprehensive management ability due to many members participating in running the business, complementing each other in management skills.

– Limited liability.

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Disadvantages of limited liability company

– Difficulty in control: Each member is responsible for the decisions of any member in the company. All activities in the name of any member’s company are bound to other members even though they are not known in advance. Because of this, the understanding and relationship between members is an important and necessary factor, because the authorization between members is implicit and has a wide scope.

– Lack of sustainability and stability, only one member is at risk or has inappropriate views, the company may not exist. All business activities are subject to suspension.

– There are more disadvantages compared to private enterprises such as: having to share profits, difficult to keep business secrets and risk of choosing incompetent and dishonest members.

See also: What is the financial market? Some popular trading methods?

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