LLC vs. Corporation. Which One is Right for Your Business? 🤔
There’s a lot to consider when starting a business. While deciding if you will be a Limited Liability Company (LLC) or a corporation (Inc.) may seem complicated, it is a very important decision that will have a significant impact in the future. LLCs are fairly new as they started in 1977 but didn’t really become popular until early to mid-1990s. Corporations, on the other hand, are much older, dating back to before the United States Revolution. Find out more major differences below to help with your decision.
All About LLCs
- Have less formalities. They do not need to hold meetings with a board of directors or shareholders.
- No ownership restrictions.
- Are able to deduct the losses.
- Have more tax flexibility. Can be treated as an LLC, as a “pass-through”, or can choose to be treated like a corporation.
- Not subject to double taxation
- Cannot be made public
- Profits of an LLC are subject to self-employment taxes
- Owners have liability protection
- Tax Liability, and cost to launch, varies by state
What You Need to Know About Corporation (Inc.)
- Must hold and document major business decisions, meeting with the board of directors and shareholders
- Corporations have limits on the number of shareholders they can have.
- Profits are not made subject to a Social Security or Medicare Tax; only salaries are
- Subject to double taxation
- More benefit plans available (retirement, stock options etc.)
- Can be made public
- Owners have liability protection
- Have more ongoing paperwork than an LLC
There is a lot that rides on choosing the best structure for your company. Make sure you get off on the right foot by choosing the structure that is best for you. Sitting down with an attorney and accountant will help you to sort out the ramifications. Make sure to double check both federal and state trademark registration to ensure that your ideal company name is available.
Working with a Business Law Attorney can help you make the perfect decision for your business. Business attorney Stephen Welle at O’Keeffe O’Brien Lyson Foss in Fargo has the skill, experience, and business acumen to help ensure that your startup is a success. For more information, please email Stephen Welle or give us a call at 701-235-8000 or 877-235-8002 (toll-free) today.
