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LLC vs Corporation – Use Limited Liability Company when Starting a New Business

What are the advantages of an LLC vs corporation? Many Americans think that the LLC and the corporation are interchangeable, LLC vs Corporationbut in fact, they are not. Much of the confusion comes because the LLC (Limited Liability Company) gives the same asset protection as a corporation.

LLC vs Corporation

The “corporate shield” is basically the same for both the LLC and the corporation. Plus, the LLC documents and the corporate documents basically parallel each other. However, there are many distinctions in the two structures. First there are terminology distinctions with LLC vs corporations. For instance, when one hears articles of incorporation, that equates to articles of organization in the LLC world. By-laws equate to operating agreement, stockholder equates to member, officer/director equates to manager, and so on.

When making an LLC vs corporation decision, often it is best for a small business to choose an LLC. Why is the LLC the best choice for a start-up? Some of the features that make an LLC a better choice are: ease of management, the ability to pick the best tax structure for your needs and charging order protection.

The LLC is easy to manage because it is a simple structure and has few legal formalities. The LLC also gives the owner the ability to pick what type of tax structure they wish to use. An entrepreneur can elect to be taxed as an S-corporation or a partnership. The election is time sensitive so some details must be attended to in a timely manner. These details are covered in the LLC Wizard. Finally the LLC has charging order protection meaning that if an individual is sued personally, the business can be protected from his personal problems. This protection is not available to corporations.

The benefits of an LLC vs corporation make a big difference for the small businessman. In my legal practice, I am preparing more LLCs all the time. As I observe all the advantages, I am beginning to wonder how long corporations will be around. Just kidding. Of course corporations will always be essential for big business, but LLCs are neat for start-up businesses.

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