LLC or Corporation: Which Company Structure is Right for You?

There comes the point with all startups that you must decide which company structure is right for your business. It’s important to understand what sets each business formation apart from the rest so you can make the best choice moving forward. While it is essential to have a basic understanding of each type of business, ultimately a business formation lawyer will be able to help guide you through the process and give you great small business legal advice.

LLC vs. Corporations

To begin, you should have a general idea of each type of business. Keep in mind; there are stark differences between structures and your determination will influence your company’s direction and success.  Here is a quick outline of the most popular options.

Limited Liability Company (LLC): The main attraction of forming an LLC is the personal liability protection it provides. This type of formation is ideal if you want to have more flexibility and pass-through taxation.

Corporation: A corporation differs from an LLC is that it doesn’t have as much flexibility regarding management or taxation. However, this formation is often most preferred by investors because owners can possess different stock options which offer different levels of dividends.

Within the corporate structures are two subcategories called S Corp and C Corp. Essentially, the main difference between the two comes down to taxation. S Corp has similar taxation as LLCs while C Corps are taxed as separated entities.  You can see other differences in this business structure chart:

BenefitsLLCCorporation
Protects personal assets from business liabilityXX
Requires the separation of personal and business financesXX
Formable in all 50 statesXX
Flexible management structureX
Flexible tax reportingX
Investor preferredX
Recognized outside the USX
IPO preferredX

Business Formation Lawyers

If you are ready to select the right formation for your business, then it’s time to invest in a business formation lawyer. LawTrades offers a selection of freelance attorneys that specialize in startup law. Another exciting option is Counsel, a subscription-based service that offer unlimited legal consultation, discounted hourly rates starting at $150 and other exclusive business perks.  Fill out our online form to set up your first free consultation.

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