Starting a Corporation Vs. LLC – What You Should Know

Starting a Corporation vs. LLC

Starting your own business means making a number of important–and not so important–decisions. From the small, such as the typeface on your business cards, to the larger matters, like where you will locate your office, your day can quickly become consumed by choices. One particular matter of importance, however, is how you will legally structure your business. Some common choices include the Limited Liability Company (LLC) format, or incorporating your business by creating an S- or C-corporation. In deciding on starting a corporation vs. LLC, you will want to ensure that you have a thorough understanding of both options.

The business structure that you ultimately land on will depend on a number of factors. You will want to consider the demands of your industry, the people you are going into business with, as well as your tax and capital goals. Neither the LLC nor corporate structure is a one-size-fits-all path, and what is right for you may not be right for others. Still, knowledge is your friend in this area, and Corporation Center can help.

Why Form a Corporation?

Before you decide to incorporate your business, you may want to understand just what a corporation is. A corporation is a separate legal and tax entity. A corporation is also owned by its shareholders. This means that when you issue stock if you want to retain ownership, you will need to ensure that you have a controlling stake. This structure is typically governed by corporate bylaws and managed by a board of directors.

You would want to form a corporation if raising capital is important to the growth and future of your business. As an LLC does not attract investment easily (often, an ownership stake will need to be given), a corporation does have an advantage in this area. By issuing stock, you can quickly generate cash for your business.

What Is a Limited Liability Company?

A Limited Liability Company is a more flexible structure when compared to a corporation. Mainly, this comes down to how it’s managed: an LLC can be run by its members, or by individuals who are hired for that task. 

The main draw for forming an LLC is the layer of limited liability that it affords its members. Should a lawsuit or bankruptcy happen, members of the LLC cannot be found personally liable, allowing them to protect their assets? Additionally, the pass-through status that LLCs have with the IRS can be appealing. This means that profits by the business are not taxed until they pass through to the members of the LLC. Conversely, a corporation is subject to corporate taxes, meaning it can be taxed “twice.”

Starting a Corporation vs. LLC

Starting a Corporation Vs. LLC – We Can Help!

Whether you are forming an LLC or incorporating your business, we can assist you. We offer easy-to-complete online forms for all 50 states, allowing you to process your documents in a quick and efficient manner. To learn more, take a moment to browse our website, or contact us by email or phone today.