Choosing Between A Corporation Or An LLC

Many people who wish to start a business are often left hanging by the question: are they going to make the business a corporation or an LLC? Choosing one of the other can be vital in the success of the company, and knowing which one would best benefit the company would depend on which type would give the most advantage to the business.

Limited Liability Company (LLC) is largely a corporation-type when it comes to the way limits the business owner’s liability. Choosing to form an LLC would give the business the necessary management flexibility along with possible tax benefits. Those who choese a Limited Liability Company for their business are provided with limited personal liability of a corporation, all while being regarded by the Federal tax laws as a partnership. The only disadvantage of an LLC is its inability to freely transfer the ownership, perpetual existence, as well as the ability for sole-ownership that a corporation could offer. This is the bargain that LLC offers in order to acquire the partnership tax status with more flexible management.

LLC largely prevent the ownership interests of the business to other people to ensure that the business is classified as a partnership to be taxed under the federal law. Limited Liability Companies generally have definite number of years in operation that would end after a specified amount of operation, or when a specified event happens. This requirement is necessary in order to qualify for partnership status when it comes to tax laws. Because of the flexibility of management, LLC allows its owners to determine and define the duties of owners, as well as having the adaptability of dividing profits and loss.

Corporations give the business the chance to raise capital through acceptance of new owners or going public. If this is what you want for your business, then choosing to go corporation would be the best option. It helps to weight the advantages and disadvantages of both LLC and Corporation, and how each can affect your business. It can be a complicated decision, so consulting with a lawyer who specializes in business law could provide helpful insight would work on your business.