Starting your own business is an exciting event, and one that you want to make sure is done right. The decisions you make now can have a long-lasting impact on your future. One of the most important things you need to decide is how you want to classify your business entity. Two of the most popular options are LLCs and corporations. They both have advantages and disadvantages, so take some time to learn about each so you can make the best decision possible.
Understanding the LLC
An LLC, or Limited Liability Company, is extremely popular and the right decision for many businesses. Like a corporation, an LLC will shield your personal assets from the liability of the business. You will need to separate your business and personal finances, which can help set yourself up for long term success. One of the biggest benefits of the LLC is that you will have flexible tax reporting options, which leaves you with much less to worry about when it comes to filing your taxes. Finally, the LLC also allows you to set up your management structure in just about any way you would like, which is not possible with the corporation.
Understanding the Corporation
A corporation is often seen as the right choice for larger businesses, but they can also be beneficial for new small businesses. One downside of a corporation is that the management of the company must be structured according to the legal requirements, which can be difficult for newer businesses. Additionally, corporations must have annual meetings with minutes, which some people find burdensome. On the other hand, corporations are typically preferred to LLCs when it comes to outside investors, and they will also make it easier to have an IPO later down the line.
Which One is Right for You?
There are many times when it is extremely easy to determine whether you want an LLC or a corporation. If you are going to be doing international business, for example, a corporation may be the better choice. In some situations, however, it can be much harder to weigh the pros and cons. Consequently, it makes sense to speak with a business attorney to get the guidance you need before forming your new entity. Additionally, an attorney will be able to properly file all the paperwork necessary to ensure your business will be set up correctly. Contact us to go over your options and see what we can do for you and your business.