Whenever you decide to incorporate a new business venture or expand your existing entrepreneurial project, it is important to understand precisely what kind of business structure you should choose. This holds particularly true if you are already in the process of launching your own business. In such a case, there are two options that you might take into consideration:
Let us check and see some of the features of both of these types of business organizations so that you will be able to know which one will be the best option for you.
It is important to point out that not all the different incorporation choices have been created equally. This is why when you are in the process of deciding between an LLC and a corporation, you should always remember that the best choice will not only help you off to a great start, but it will also act as the key accelerator for your company’s ongoing success and growth.
The Main Advantages of a Limited Liability Company (LLC)
There are a number of benefits that are associated with an LLC. Some of them include the following:
The core advantage of an LLC is that it protects its business owners (known as members of the LLC) from being held personally liable for all the actions of the LLC. This form of limited liability is the best possible safeguard. In fact, it helps to protect the personal assets of the owner if the business becomes insolvent.
In the case of the bankruptcy of a sole proprietorship (or even a partnership firm), the private property of the individual owner is at risk of liquidation from the creditors of the business, who will take over these assets in order to recover their loans.
Greater Flexibility in Management
LLCs have a really specific management structure, where the directors have the responsibility of overseeing all of the major business decisions of the company at the strategic level. On the other hand, the employees of the company are responsible for the day to day running of the business. However, this division is not always ironclad since the BOD (board of directors) can’t even get involved in the daily activities of the company.
With pass through taxation, most of the taxes of the company are not paid at the business level. In the case of an LLC, the total income and/or loss will have to be reported on the personal tax returns of the individual members.
The C corporation can also provide its employees, including all shareholder-employees, with some really great tax-free fringe benefits. The S corporation will allow its shareholders to avoid corporate income tax on different types of business profits. In fact, it is also possible for shareholder-employees to reduce their payroll taxes to a substantial degree.
LLC vs. Corporation: Some of the Major Differences
There are various points of difference between corporations and LLCs. Some of them include the following:
The S corporation advantage allows the owners of the business to use their business losses, such as different startup expenses of the new business venture on their own personal return. In this case, they are shown as straightforward tax deductions.
An S corporation also has the benefit of being able to provide savings on self-employment, social security and even Medicare related taxes. In the long run, this allows many shareholders of the company to offset non-business income with any losses that they may have incurred from their company.
The Various Steps of the Incorporation Service Process
- Evaluate the various types of incorporation
- Select the type of business you want to incorporate
- Select a specific name of your business: Be very careful here since the name will become the identity of your business
- Provide the names, addresses, and the titles of all the members of the board
- Decide on the election or the appointment of the board
- Complete all the relevant forms
- Submit the same
In the light of the above, it can easily be seen that both LLCs as well as corporations have their own pros and cons. And this is why it is very important for the owners of the business to take expert advice before deciding which one would be the most suitable option for them.
When you opt for a specific structure for the incorporation of your business, it is absolutely vital that you take the advice of the best professional consultants in this field. This is because the decision cannot be changed easily once it has been made and you will be stuck with that particular corporation for the duration of your business.
This is the part where the very best professional consultants will come into the picture. They will conduct a comprehensive audit of your business and then determine exactly which structure would be deemed ideal for your specific needs and requirements. After that, they will present you with the different incorporation options as well as their own specific recommendations.
The professionals at BryteBridge have many highly qualified experts and professionals who have a lot of experience in drafting the vitally important articles of incorporation. Since these articles are binding for the company owners, great care has to be taken to ensure flexibility. This has to be done so that both the current and future needs of the business will be taken into consideration.
For further details and queries regarding incorporation, you can get in touch with the experts at BryteBridge. Their highly skilled professionals will guide you through each and every step of the whole incorporation process.