Reasons For Choosing LLC Over S-Corporation
In the course of this article you will be presented with the most important reasons why you should choose the Limited Liability Company, or LLC, over the S-Corporation. All these reasons are related to giving business owners more freedom and tax advantages. The first advantage to setting up a Limited Liability Company, is LLCs do not have to hold formal meetings, as S-Corporations are obliged to. Also, Limited Liability Companies are not required to keep detailed corporate minutes, along with offering the owners of such companies are also benefiting from greater tax flexibility. Furthermore, Limited Liability Company owners are presented with the choice of being taxed as a pass through entity or a corporation in the traditional sense. The bottom line is that while S-Corporations offer the same liability protection, LLCs present ‘members’ with less corporate formalities.
Whether you choose it is wiser to incorporate or start LLC, both alternatives are great for minimizing liability and, of course, increasing the company’s credibility in the already established marketplace. All successful business owners are aware of the fact that in order to build a solid image for the company, any individual that is thinking to start new business needs to either set up a Limited Liability Company or choose to incorporate in order to reach the company’s full potential. Both options have their advantages and disadvantages at some stage, so the decision on whether to incorporate or start LLC needs to be made after the intent and direction of the company have been carefully determined and assessed.
The decision to incorporate is usually taken for companies that operate at a larger scale and have a larger number of employees, in the hundreds. The needs of such a company are significantly different to those of a small scale company, in which only a few people operate. The most basic way to explain the differences between deciding to incorporate and start LLC is this. LLCs are suitable for small scale companies as they require a considerably number of formalities.
Corporations, while they offer much more opportunities for increasing the company’s capital, also require ‘members’ to perform certain time consuming formalities such as keeping extremely detailed corporate minutes or records, holding annual corporation meetings, and more, thus leading to an increase in costs. For those small company owners that do not wish to get involved with all the complexities of corporations and formalities, setting up an LLC is the best course of action. An LLC can be set up by a group of people or by only one individual. For an individual thinking to start LLC will start to feel the benefits if the company is going to take risks. Otherwise, the LLC which sometimes is a lengthy process can prove to become unnecessary. In such cases, sole proprietorship is the best way to go.
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