Susan will market the device directly to consumers until the two friends can license their product to a large manufacturer. Susan and Selena do not want to split the gains and losses equally. Until the advent of LLC's special allocations could only be made within partnerships. Although partnerships offer the flexibility of special allocations, they also have a major disadvantage. Each partner is liable for all the debts of the partnership.
Limited partnerships are available to shelter passive investors from liability.
However, organizing a limited partnership is expensive and complex. LLCs provide a simpler alternative. In general, the owners of a corporation are not personally liable for the corporation's debts. Indeed, owners often incorporate their businesses primarily to gain protection from personal liability. Accordingly, the members of an LLC will ordinarily not be liable for the LLC's debts.