You decided to start your business and it’s time to incorporate, but don’t know which business type to choose. Yes, this may be a huge choice for you, especially if you are starting a business for the first time. This article is looking into the brief of two different business type structures, Corporation and LLC. With this you will get an idea about the two and which one you need to select for your business.
What is Incorporation?
Incorporation is the legal process used to form a business or company. Where this corporation will be a separate legal entity from its owners and having their own rights and obligations. This incorporation having many benefits including the protection of owner’s assets, tax benefits, easy transfer of ownership etc. With this incorporation the company’s credibility also increases.
Here is the question, how you choose the best incorporation for your business? Let’s get in to each.
LLC or Limited Liability Company Benefits
LLC or Limited Liability Company is one type of business structure which protects the business owners from the personal risks involved if there is any lawsuits against your company. There is no limit on the number of business owners in LLC. For individual business owners, the LLC offers a one-person LLC form, which is taxed as a sole proprietorship.
In LLC there is no formal business structure. But, LLC provides members with the option for management.
Profit and loss are passed through to the owner’s individual tax return. With the pass through taxation, taxes are not paid at the business level.
Thus, LLC enjoys much more benefits than unincorporated business, were LLC at the same time provides liability protection and corporation offer.
If you want to know more benefits of LLC, check with these experts.
Corporation Business Structure
There are two type of Corporation, S Corporation and C Corporation. In S Corporation, there is pass through taxation similar to LLC, where as in C Corps are taxed as separate entities. C Corp tax structure requires double taxation of corporate profits. Also, corporations must have a formal business management structure, where the Directors are the major decision makers in the business.
Both the C and S Corporation offers limited liability protection and both requires the article of incorporation to be filed. They are similar in many terms but differ in complex department of taxation and ownership.
LLC or Corporation? Making Your Choice
Deciding which business structure you need is not an easy task, you should get into each of these structure details and its offerings. And, it is always recommended to get the advice of a registered agents for your business before you choose the best and suitable business structure for your new company.