Advantages of an LLC Vs a S-Corporation or C-Corporation
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Advantages of an LLC Vs a S-Corporation or C-Corporation

A limited liability company, or LLC, has many advantages to S or C Corporations. Keep in mind, that structuring your business is also dependent on the individual situation. In some cases, it may be to your advantage to enter into an S or C Corporation. For example, if you intend to take your company public you cannot do so under an LLC.

LLCs combine several elements of S and C Corporations. You are not limited to how you divide the company while partnerships must be divided 50/50. You do not need to keep minutes. You may have as many members as you need or want. A LLC dissolves after a member dies or goes bankrupt, whereas a corporation continues as its own entity. You also are not personally responsible for corporate debt in an LLC, unless you have made a personal guarantee.

This is very important. If you manufacture a widget and that widget ends up as the center of a lawsuit due to injury or death, your personal assets cannot be attached to the lawsuit with an LLC. In a corporate structure, it is possible to have your personal assets attached in lawsuits. This is what makes LLCs a very lucrative choice for smaller companies.

As for the tax advantages, with an LLC you generally avoid a double tax through something called flow through taxation. All of your expenses, losses and profits first flow through the company to the members. This means you do not pay both corporate tax and individual tax. With S or C Corporations you will be subject to double taxation.

The best thing to do is have a general understanding regarding what sort of business structure you feel suits your needs and your business purpose. It makes sense to do this right, so you should consult a corporate attorney. Most will give a free consultation, or an inexpensive one (less than $200). You will be able to ask all sorts of business related questions and advice at that point, so that your solution is catered to your needs, including tax.

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