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LLC or Corporation?
If you are an established company, then incorporating may be the option for you. However, if you are a new company just starting up, the LLC structure may be more attractive for the following reasons:
- It is easier to change from an LLC to a Corporation than from a Corporation to a LLC.
- If your company incurs any losses in the first year(s), you may write them off your personal income tax return. When you start to see a profit, you can incorporate and take advantage of the low tax rates afforded to Corporations.
The chart below provides a quick reference to Corporations vs. LLCs.
| Corporation | LLC | |
|---|---|---|
Type of Ownership |
Stock, there may be different classes. |
Membership interests. There may be different classes of membership. |
Eligible Owners |
No restrictions. |
No restrictions. |
Management |
Managed by director(s) and officer(s). |
Managed by all members or designated manager(s). |
Allocations of Ownership |
None. Dividends must be paid based upon stock ownership. |
Permitted if the allocations have substantial economic effect. |
Liability of Owner |
There is limited liability for shareholders, officers and directors. |
There is limited liability for owner(s) and manager(s). |
Duration |
Indefinite |
Dissolves at the time specified in the Operating Agreement or upon the loss of a member unless other members agree to continue. |
Transfer of Ownership |
Shares freely transferred. |
There may be restrictions under certain state laws. |
Meetings can be held anywhere |
Yes |
Yes |
Talk to us about which entity is right for you.