LLC VS CORPORATION
ADVANTAGES AND DISADVANTAGES OF FORMING AN LLC
Forming a Limited Liability Companies or LLC is a very prevalent option among different types of enterprises. This action allows the union of facets from both partnership and corporation specifically the asset protection provided by a corporation and the tax advantage we get through partnership.
ADVANTAGES OF THE LLC
A business owner’s personal liability towards the credits and obligations made by the company is limited unless if they have agreed to make a personal guarantee
no specified citizenship for business owners
The task of record keeping is uncomplicated and hassle free. The holding of regular meetings and formal minutes is unnecessary unlike in the case of a corporation.
LLC ADVANTAGE ON TAX
Forming an LLC provides business owners with a number of benefits concerning tax. They can steer clear of “double taxation” imposed on corporations. Unlike a corporation, LLC owners can choose how they want to be taxed by the IRS. They can decide if they want their enterprise to be taxed as partnership, sole proprietorship, S Corporation or C Corporation.
If a business owner is undecided on how he wants the IRS to tax his business, then he can still go on with forming an LLC and suspend his final pronouncement on the tax issue after he has conferred with a tax advisor.
Additionally, if the proprietors decide on considering the LLC as a sole proprietorship or partnership, they are entitled to use the “pass – through taxation” advantage wherein owners detail their allocation of gains and losses in the company separately on their personal tax returns.
LLC ADVANTAGE ON PROFIT SHARING
The owners of the LLC can choose on different ways of sharing the company profits. They are not compelled to divide the gains equally among themselves as provided in most partnerships.
DISADVANTAGES OF THE LLC
Unlike corporations whose existence is ceaseless, an LLC’s subsistence is limited by the death of a member or when the company goes through insolvency.
For business owners who intend to make their company public, the forming a corporate business will serve his purpose better.
If you run your business through sole proprietorship or partnership, there will be less paperwork to accomplish. The government decides on the classification of your LLC or it is classified by default. It may be categorized wither as sole proprietorship, partnership or as a corporation.