So, in reality, there is no advantage to corporations for having a more
established body of law except in those limited cases of larger
businesses and with publicly traded companies that have multiple layers
of shareholders and investors. In those cases, the business could benefit
from Delaware's corporations case law and statutes. LLC | Corporation -
BUSINESS FACTORS This category of factors are either going to be decisive
factors for your business or not really relevant at all to your LLC -
Corporation decision. Going Public. If you plan on building an empire and
taking your business public with an initial public offering (IPO), then
you will need to use a corporation as a legal entity. Require Venture
Capital Equity Investors. If your business will have a venture capital or
other professional investor, that investor will most likely require that
you use a corporation as the legal entity. Although there is a trend for
some professional investors to make investments in an LLC, the
overwhelming majority of them will require the use of a corporation not
only because corporations have been the standard investment vehicle for
venture capital but also because in some cases, the use of a corporation
provides them with tax benefits. If you plan on using your own money or
only having yourself, your business partners, friends and family as
owners of the business, then this factor is not relevant. Special
Distribution Percentages. If you would like to distribute business
profits to owners in a manner other than in direct proportion to the
ownership interests held by the owners of the legal entity, you will need
to use an LLC. Corporations must distribute profits according to the
relative stock ownership in the corporation. LLCs on the other hand can
use whatever allocation proportion the members choose as long as it meets
certain requirements under the Internal Revenue Code. If you are
considering a special allocation, you will need to use an LLC and you
will definitely need to retain a CPA professional to advise you and draft
the relevant tax provisions of your LLC operating agreement. LLC |
Corporation - TAX FACTORS Tax matters are important to any business.
After all, tax issues determine how much you have to pay the government
in taxes and so these factors are directly relevant to how much of the
money that you get to keep at the end of the day! The limited liability
company offers more tax choices than a corporation. When you form an LLC
business, you can elect for profits to be taxed pursuant to a pass
through structure (single layer of taxation) or pursuant to a C
corporation (double taxation) or S corporation structure (single taxation
but with many requirements and ongoing compliance requirements). The
corporation only has the choice of C corporation or S corporation
taxation.As a business evolves, things change and with an S corporation
tax status, you need to always be checking the latest S corporation
requirements. The failure to meet a requirement, even if by accident or
temporary, can result in significant taxes owned and penalties. The S
corporation can have some tax benefits over the standard pass through for
some LLC businesses when it comes to self employment taxes.
Unfortunately, they do not know that an LLC can be taxed as a C
corporation or S corporation.