Liability Issues - Limited Liability Company Essay

indebtedness Issues - Limited Liability Company - Essay ExampleIn this case, though, it appears that the sole trader concept is not appropriate for these tierce individuals. This is because the sole trader is an individual who sets up an entity. Thus, whatever entity they set up will not be a sole trader. Thus, it could either be a limited liability company or a work partnership.A limited liability company is one in which the three individuals can crop by pooling their resources in the form of acquiring carry ons in the company to be formed. The acquisition of shares creates a recognize entity that will wee-wee a limited liability.On the other hand, if the three individuals in question watch to form a partnership, they will be a collection of individual sole traders who will grant their resources according to a ratio. Based on the ratio of contributions, they will bear responsibility for issues that come up and also get to split profits on the basis of the ratio. However, par tnerships often do not have a limited liability.The concept of limited liability is steeped in the idea that a firm is divide from its owners. This is steeped in the case of Salomon V Salomon (1897) in which a man created an entity with 20,007 shares. He took 20,001 shares and sold one share each to six of his family members. The business went into liquidation and the creditor sued for the recovery of money from the owner with 20,001 shares. The court held that once it was structured as a company, the liability was limited and the liability for issues and matters was only limited to the assets and shares owned by the business itself.Based on this, it is deduced that a business that has a limited liability is separate and different from its owners (James and Tilley, 2009). In doing this business, at that place are risks and there is a possibility that the computers of the firm could encounter some forms of risks.In that case, there is the need to protect the entity from having its liability spread from the organisation they will form to the owners of the business.