What is a personal liability company?
A personal liability company must end with the word “Incorporated” (Inc.), which meets the criteria for this type of private company. The directors and previous directors of the company, are equally and legally responsible together with the company for any debt and liabilities of the company that were contracted during their respective terms of office. A Personal Liability Company is a private company that’s mainly used by professional associations such as consultation services or accounting to name two examples.
Advantages of a personal liability
- Limited Liability organizations provides security for their owners. If the organization has outstanding debt, the individual owners will not be held responsible for those debts. If the organization has to file for insolvency, the individual owners are still not personally accountable for any of the liabilities the company has.
- Taxation is not doubled. Taxes in your corporate profits are not payable, as well as on profits that pass through to your members. Taxes are only paid once on those profits that are given to individual members.
- Owners can choose to have profits distributed to them in any way they would like them to be distributed. Whatever percentage they wish to give to a member, they are free to make that decision.
Disadvantages of a personal liability
- New challenges in terms of the way your organization files taxes are faced on a daily basis. Selecting the sole proprietorship format would be the easiest to complete but that may not always be an available option. Your status may be chosen for you.
- Prolonged existence of the company is based on the life of a members. The company will no longer exist if a member goes bankrupt or passes away.