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Limited Liability Companies

ArticleID 70  
Writer Grace Odinga
Category Personal Article

In a limited company, the liability of members is limited to a stated amount, usually to the face value of shares a member holds in the company. The liability of unlimited companies is unlimited like those of sole traders and general partners.


This form of organization has some elements of a partnership and some of a corporation. Income taxes are paid only on money distributed to members as ordinary income like a partnership. Members’ liability for the actions of the company or other members is limited like in a corporation. However, like a partnership, members can be held liable for their own actions or misconduct.

This form of organization can be cumbersome and expensive. Memberships can be sold only when all members agree to the transaction. Financial statements must be prepared at the request of any member. The LLC status has enhanced its choice by entrepreneurs. The LLC has the following characteristics:

• Whereas the corporation has shareholders and partnerships have partners, the LLC has members.

• No shares of stock are issued, and each member owns an interest in the business as designated by the articles of organization, which is similar to the articles of incorporation or certificates of partnership.

• Liability does not extend beyond the member’s capital contribution to the business. Thus, there is no unlimited liability, which can be detrimental in a proprietorship or general partnership.

• Members may transfer their interest only with the unanimous written consent of the remaining members.


Persons intending to form a joint stock company are required to furnish the Registrar of Companies with the following documents:

(i) Memorandum of Association.

(ii) Article of Association.

(iii) List of directors, with details of names, addresses, occupations, shares subscribed and statement of agreement to serve as directors.

(iv) A statement signed by directors stating that they agree to act as such.

(v) A declaration that the. Necessary requirements of registration have been duly complied, with. This declaration, can be signed by the company Secretary or by one of the directors or promoters of the company.

If these documents are found to be in order by the Registrar of Companies, he may ask the promoters of the company to pay the necessary registration fees. After payment of the fees, a Certificate of Incorporation, giving legal entity to the company is issued.

Limited Liability company, Type of Business, Starting a Business, Entrepreneur, Entrepreneurship
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