What is the advantage to forming a corporation (inc) rather than a limited liability corporation (llc) in the United States?

A couple of advantages come to mind about forming a corporation over an LLC. The first advantage is in the transfer of ownership interests. It is easier for someone who owns shares (part of the corporation) to transfer their ownership interests. A corporate formation makes it much easier for someone to sell their shares or to give their shares to another person (or more than one person) in their Last Will and Testament.

A second advantage of a corporation is seen in the instance that you plan to seek traditional investors for your business. Often, people who need money for their business will seek traditional investors who will put money into the business. In exchange, the investors often become partial owners of the business. With an LLC, there are membership interests and not stock or shares. Starting an LLC with multiple members is much easier than adding members down the road and giving them a certain percentage of the business. With a corporation, it is easier for the business to give out shares (or partial ownership) in the business. Just make sure that if your investors are friends or family that you follow securities law and give the proper disclosure and complete the right forms so that you stay out of legal trouble.

Remember that you need to factor in other potential issues and considerations such as taxes, compliance, and whether you want board members (shareholders) running the business. So, you need to think long and hard to choose the best entity up front. It wouldn’t hurt for you to get some legal advice related to your question. It’s important to include all of the relevant details of your startup into consideration.

At LawTrades, we offer a marketplace of attorneys and our goal is to provide legal advice to businesses transparent, affordable pricing. In fact, you might find our LawTrades Micro service helpful. With it, you pay an affordable flat rate (usually around $25) and you ask an attorney your question. You’ll get the answer to your question within 48 hours!