One day John came across a friend he had known from college name Jane who was also in the t-shirt business. Both John and Jane knew that if they combined their assets and their knowledge they could do much better than either could on their own. John and Jane decided to merge into one company and form a partnership. At this point both John and Jane where sharing the company and the company’s profits, but they were also sharing the liability if someone should sue the company or if the company got into some form of legal or financial trouble.
The company remained a small entity but the liability made John and Jane uneasy and if the company started to incur debts both John and Jane’s careers and finances would be in a lot of trouble. To solve these problems John and Jane joined up with another high end t-shirt maker to form a limited liability company. All three entrepreneurs where now members in the LLC and would be taxed individually but still be active managers and owners in the company.
The company grew