When it comes to starting a business, it is important to understand what each designation means in order to make a good decision regarding which one to go with. When it comes to a corporation versus an LLC, you want to choose the one that is going to be best suited for your intentions. Below, we will be going over some of the main things that you should be looking at in order to make the right decision.

Choosing Between an LLC and Corporation

LLC Advantages:

1. Owners.

When it comes to starting a business, an LLC is going to provide the advantage of allowing an unlimited number of owners. Therefore, if you are going to be starting a business with other people, you are likely going to want to opt for an LLC simply to be able to list everyone as an equal owner.

2. Profit and Loss Tax Advantages.

Another benefit that comes with starting an LLC is being able to calculate and pass through profit and loss through the owner’s individual tax returns.

3. Annual Meeting.

Another benefit that comes with starting an LLC is being able to avoid having to hold an annual meeting or minute book requirement.

LLC Disadvantages:

1. No Stock.

When you own an LLC, you are not going to be able to issue any sort of stock. Therefore, your investor incentives will be much lower than if you were to start a corporation because you would be able to offer stock as an incentive for funding.

2. No Corporate Income Splitting.

Some businesses engage in corporate income splitting in order to lower tax liability. This is simply not possible with an LLC.

Corporation:

1. Issue Shares of Stock.

One of the biggest advantages of starting a corporation is being able to issue shares of stock in order to attract more investors. This is going to allow you to generate more investment in your business if you are looking to take on additional funding.

LLC and Corporation

2. Lower Tax Liabilities.

Another benefit that you can get from starting a corporation is the ability to income split which can lower the overall tax liability in total.

Corporation Disadvantages:

1. Restrictions On Number Of Owners.

One of the biggest disadvantages of corporations is the fact that they typically have restrictions on the number of owners that you are going to be able to have.

Overall, it is going to come down to what benefits your business the most and which structure provides your business with the most benefits that adhere to your needs.

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