Choosing an legal entity for running a business is an important step. LLC and Corporations have been top legal entities. The main reason businesses are choosing LLC or Corporations is because they both offer the same personal asset protection for the business owners. In fact the LLC took its personal asset protection laws from corporations which will hold up in court to protect the business owner. While both are a safe legal entity option when it comes to personal asset protection, when choosing it is important to compare the benefits to both to make sure you choose the best legal entity for your business.
- Corporations shares of stock are issued, every share must represent an identical unit of ownership
- LLC gives membership units, there is the option to define different rights and obligations to members separate and apart from the membership unit
- Corporations can publicly traded shares
- LLC have no publicly traded options for membership units
Corporations are required to have a central body of management structure, The Board of Directors are elected by the shareholders to serve board terms and authorized to manage the company.
Corporation shareholders do not have management authority.
The LLC has no required structures
Members (owners) can manage an LLC or it can be manager managed
- Corporations are mandated to hold meetings and document corporate decisions with shareholder or director votes and resolutions.
- LLC has no mandated paperwork
- The IRs allows an LLC be taxed however it chooses; single layer taxation, C corporation or an S corporation
- The Corporations profits are taxed twice through double taxation; corporations can qualify for S corporation
Choosing an LLC or Corporation
With an over view of both an LLC and corporation your businesses should now have an better idea of what legal entity is best for your businesses needs. While Corporations have been around for a longer an LLC has many of the same benefits as well as many of its own making it a more popular choice for businesses today.