An Irvine Business Attorney on Corporations vs. LLCs
A primary issue that should be in the forefront of everyone’s mind who is operating or intends to start a small business is limiting, to the greatest extent possible, the liability of the owners.
Limited Liability Corporation
An LLC is becoming a popular option for many small businesses due to:
- Ease of formation
- Relaxed rules for record keeping
- Flexibility in management structure
- Avoidance of “double” taxation
For many, the double taxation imposed on a corporation, first on the corporation itself and then again at the shareholder level, tips the balance in favor of an LLC. The net income of an LLC flows through the company, which pays no tax as an entity, to the owners, who are known as members.
If it is likely the business will require or opt to have investors or raise money through the sale of public stock, a corporation is likely a wiser choice as a business entity. Additionally, a corporate business structure allows owners to be both employees and shareholders, which has several advantages.
As an alternative to the traditional C Corporation, an S Corporation may prove effective. An S Corporation is one in which a limited number of owners own a majority of the stock. Its primary advantage is it enjoys the legal rights of a corporation but is taxed like a partnership.
Contact an Irvine Business Attorney for Legal Advice
Choosing the most advantageous type of entity for your business is a decision that will have a large impact on your ultimate success. Explore your options. Call Daily Aljian LLP, an Irvine business lawyer at 949-861-2524.