Choosing Between an LLC and Corporation – Corporations LLC

When you choose to make the next step in your business and incorporate, you are faced with a big decision: should you form an LLC or a corporation? With either choice, you gain limited liability protection to shield your personal assets from the debts and liabilities of your business, as well as several tax advantages. Still, there are big differences between these two types of business entities and your choice will have a big impact on your business. Here is some information to help you choose between the two.Limited Liability Company
What is an LLC? An LLC, or limited liability company, is one of the most popular choices for small businesses and it is basically a pass-through entity, but it can be taxed as a corporation as well. Many business owners choose to form an LLC because this entity is very flexible; the company income can be passed through to individual members, who pay their share on their tax return, or it can be taxed as a C corporation or S corporation.LLCs have no specific structure or management that must be met. While most people choose to manage their LLC with members, or owners, they can also choose to form an LLC with a Board of Managers. With an LLC, you gain limited liability protection, which protects your personal assets if your business is sued or cannot pay its debts.Corporation
A corporation is usually a better fit for a larger company as there are strict requirements to meet. A corporation must have a central management structure with a Board of Directors. Ownership is also very different as a corporation issues stock, which is all the same. A corporation is also required to have regular meetings, maintain and file documents, and maintain minutes.An LLC can choose how it will be taxed, but a corporation will be subject to something called double taxation. This means that business income is taxed at a corporate level and then taxed again when it is distributed to the shareholders.Choosing Between an LLC and Corporation
There is no choice that will be right for every business. As a general rule of thumb, however, an LLC is a better fit for small businesses and start-ups, as LLCs have less requirements and it costs less to maintain and form an LLC while enjoying limited liability. Corporations are usually a better fit for large companies.The best way to choose between these two entities is with the help of a lawyer, accountants, or a corporate services company, as the decision is based on many factors related to your business, including your risk level, business income, and long-term goals.

Facts About Setting Up a Limited Liability Corporation – Corporations LLC

A limited liability corporation (LLC) is a unique business structure that provides protection from personal liabilities and gives the tax advantages of a partnership. It has become very popular in recent years for small business that want to incorporate. Each state has its own specific requirements and setting up a limited liability corporation is quite simple and can be done in very little time and with minimal effort.The very first thing you must do is to get a copy of your own state’s LLC Articles of Organization form. This form is available from the office of the Secretary of State and must be filled out completely with such things as business name, business purpose, office address, and names of initial members of the LLC. (Naming your business requires that you comply with all state rules so ask for a copy of your state’s rules for LLC business names.) In addition, ask if you must post a notice of your intentions to form an LLC in the local newspaper. If so, it’s a good idea to publish it before you file your LLC Articles of Organization form.The next step is to submit your LLC Articles of Organization form to your Secretary of State. You also must enclose the appropriate filing fee which can range from $40 to $900. A few states also charge a corporate tax that must also be paid at the time of filing. Check with your Secretary of State to find out if you must pay this additional tax and to determine how much it will be.Once you have completed the steps listed above, you will need to create an LLC Operating Agreement. This is especially important if you are not the sole owner of the business. This agreement documents, in detail, all of the financial and management rights and responsibilities specific to members of the LLC. Basically, putting this information in writing prevents any future complications down the road. It’s a good idea to write the LLC Operating Agreement before filing the LLC Articles of Organization form so that everyone knows, up front, what they’re signing up for.Setting up a limited liability corporation can be done on your own or under the advice of an attorney. Each state has its own unique rules and regulations so consulting with an attorney and/or researching the internet beforehand will answer many of the questions you may have about incorporating in your own state.