Incorporation, LLC vs. Corporation

Regardless of whether you choose to incorporate as an LLC or an Inc., it is important to limit your liability by holding ownership interest through an entity as opposed to an individual. If you own any property in your name personally, we highly recommend you transfer your interest to an entity that you can own 100%. This will shield creditors from coming after your personal assets.

FORMATION

  • While both LLCs and corporations require filing paperwork with the state, the formation process is generally more complex and expensive with a corporation. In a corporation, you have to elect a board of directors, hold annual meetings, and record minutes of those meetings for tax and legal records.
  • LLC with multiple members should execute an Operating Agreement. Corporations with multiple shareholders should execute By-Laws.

RAISING MONEY 

  • A corporation can raise capital by offering investors shares of the company, while an LLC requires a percentage of the company to be allocated to the investors by way of the LLC’s operating agreement. A corporation can go public, while an LLC cannot.

TAXATION

  • Corporations are taxed by default as C-corps, which are subject to corporate tax on profits. But, corporations with less than 100 shareholders, may elect to be taxes as an S-Corp. LLC are more flexible, can elect to be taxed as an S corp, sole proprietorship or partnership (depending on the number of members it has). S corps enjoy pass-through taxation, which allows you to pay taxes through your personal tax returns.

Reach out to Pooja Patel, Esq. at ppatel@dpaattorneys.com for a free consultation regarding which corporate structure fits your needs best. DPA Attorneys offers fixed fee pricing for creating an LLC or Corporation.