Deciding to Form an LLC or a Corporation
Limited Liability Companies (LLCs), S Corporations (S-Corps) and C Corporations (C-Corps) are three commonly formed legal entities. When deciding which entity will best serve your business needs, you should consider the benefits and requirements of each entity.
LLCs and corporations can protect its owners from being held personally liable in the event of a lawsuit against the company. In doing so, these entities can safeguard your personal assets, such as your home and personal bank accounts.
An LLC can offer greater flexibility in the management of the business compared to a corporation, as an LLC can be managed by one or more managers, or by its members. LLC members can decide amongst themselves how they want the company to be governed and then memorialize the terms in the LLC’s operating agreement. The terms can include management responsibilities, voting rights and each member’s initial capital contributions.
Corporations on the other hand must have a board of directors who oversee major business decisions and officers who are responsible for its day-to-day operations. Corporations are required to hold scheduled director and shareholder meetings. They must maintain formal company records including minutes from its meetings and corporate bylaws which specify how the company will operate.
Under the new federal tax laws, there can be tax advantages and disadvantages to each entity, depending on the owner’s goals.For example, an owner of a S-Corp may be able to deduct business losses on his or her personal tax returns. A C-Corp may offer better benefits to investors of a developing business. A properly-formed business entity can save you thousands of dollars each year.
The attorneys at Chauvel & Glatt will work closely with you and your financial advisors to form a legal entity that will help accomplish both your short and long-term goals. Contact us today to learn how we can help your business.