LLC or Corporation?
LLC or Corporation?
Both will protect your personal assets but which one is best for your new business idea? You should consider a few things like who will be involved. Limited Liability Companies (LLCs) are not always recognized overseas so foreign investors and businesses may not like your LLC status. Also while an LLC is recognized all over the United States different states have different rules and filing requirements. You always want to compare the cost of incorporation long-term over the cost of an LLC long-term. Both are going to require certain state taxes and filing fees. Both require a certain amount of paperwork and activity to ensure you keep the business finances separate from your personal finances. Corporations require annual meetings and recording of minutes.
You also need to consider which type of activities you plan on pursing. For businesses with real property and other appreciating assets, an LLC may be better for taxation reasons. Corporations allow for an S corporation status with certain taxation benefits, but the S corporation does not allow for foreign investors to be part owners. Also, if at any point you want to issue shares, either to attract investors or to go public (IPO), you cannot do an LLC. The LLC would have to be dissolved and your business would need to be incorporated to issue shares.
To summarize, short-term there is no harm in picking one form of business over another; however, your long-term plans and unexpected growth could mean you need to modify the business structure. Every change and filing with the state requires money for the fees. Always review your business plan and consider what future opportunities may come up when deciding on a business structure.
This web site is not intended to be a source of legal advice or legal information. Please do not consider this information to be an invitation for an attorney-client relationship, do not rely on the information provided herein as legal advice, and you should always seek the legal advice of competent counsel in an appropriate jurisdiction.