Should I Form a corporation or form an LLC?
This is probably one of the most common questions many small business owners ask when they are looking to incorporate. You definitely should consider the advantages of both a corporation and a limited liability company (LLC) and which one is better for your company’s short-term and long-term goals when incorporating.
Though both corporations and LLCs can help protect personal assets from business debts and any potential lawsuits or judgments made against your business entity, a corporation and LLC still different in a number of ways. It is important to weigh the options carefully as selecting the right structure to help maximize the chances for success.
Here are just a some of the ways in which the structures differ from one another.
|Advantages of an LLC
||Advantages of a Corporation
- unlimited number of owners
- profit and loss are “passed-through” to the individual owner’s for tax purposes
- no annual meetings or minutes requirements
- can issue shares of stock to attract investors
- splitting of corporate income may reduce overall tax liability
|Disadvantages of an LLC
||Disadvantages of a Corporation
- cannot engage in corporate income splitting to reduce tax liability
- cannot issue stock
- double taxation of corporate profits and shareholder dividends
- required to hold annual meetings and record minutes
- S corporations are limited to 35 shareholders
Choosing to incorporate or form an LLC is an important decision. We suggest that you take your time making this decision and if necessary, consult with an attorney or accountant. We do not provide tax or legal advice.
Note: LLC owners can elect for the IRS to tax the LLC as a sole proprietorship, partnership, C Corporation, or S Corporation. Owners make this election through the IRS after the company forms with the state of its choosing. This means that you can retain the structure and simplicity of an LLC with the tax advantages of S Corporations, C Corporations, sole proprietorships, and partnerships. We can help prepare this paperwork for you a fee of $99.
Regardless of which business structure you choose, EZ Incorporate can help you incorporate or form an LLC online, or by phone, in minutes.
What to Expect After Placing Your Order
We will complete the state-required forms and submit them to the Secretary of State.
This is done within 1 business day of when you place your order and within the same business if you complete the form before 9PM PST. If your signature is required on the documents, we will email them to you and arrange for your signature.
In some instances we may need to verify your personal information, the company directors’ information, or, in the case of an LLC, members’ information, before forming the entity. We will contact you in these cases.