5 Key Considerations When Selecting an LLC Vs Corporation for a Business in Los Angeles

When it comes to selecting a business structure, entrepreneurs and small business owners have many options available—from Sole Proprietorship, to LLCs, to C-Corps and S-Corps. Each option comes with its own unique set of benefits and drawbacks. Knowing which structure is right for your business isn’t always easy. Here, we’ll help you narrow down your decision-making process by focusing on two of the most popular business structures available in Los Angeles: LLCs and Corporations.

Deciding between forming an LLC or a Corporation for your business is often a difficult decision. This is because there are several distinct differences between the two structures, including how each is taxed, managed, and structured. To ensure your business is structured in a way that’s right for you and your business’s specific needs, it’s important to be aware of and understand the key considerations that come along with an LLC and a Corporation. We’ll explore these considerations in the sections below.


When deciding between an LLC and a Corporation, it’s essential to consider the long-term effects on your taxes. The tax structure of an LLC and a Corporation is different and the structure you choose can have a significant impact on the taxes that you’ll have to pay.

An LLC is a pass-through entity. This means that all profits and losses from the LLC are passed onto the individual(s) who own it, and the owners of an LLC are likely to pay taxes based on their individual tax rate. Corporations, on the other hand, are taxed as separate entities from their owners. Depending upon the type of Corporation set up, shareholders will pay corporate taxes at a higher rate than they would as individuals; and depending on the capital structure of the Corporation, they may also pay additional taxes as individuals.

Corporate Position and Ownership Rights

Another key consideration when selecting between an LLC and a Corporation is the issue of corporate position and ownership rights. An LLC is usually managed according to an Operating Agreement, which outlines the duties and responsibilities of each member and dictates how the business is managed.

Corporations are managed by a board of directors and must adhere to a corporate by-laws, which outlines how the business is legally run and how decisions are made. Additionally, in certain cases, shareholders of a Corporation may be able to have certain ownership rights, such as voting rights or the right to select directors.

Protection from Personal Liability

When selecting a business structure, it’s important to choose one that offers protection from personal liability. An LLC offers its members protection from personal liability, meaning that members are only responsible for the business’s debts and obligations to the extent that they are invested in the LLC.

In the case of a Corporation, shareholders typically have limited liability for the obligations of the business beyond their own investment. The legal liabilities and debts of the Corporation are considered separate from those of the individual members, thus limiting the personal liability of shareholders.

Raising Capital

Raising capital may be necessary at some point to finance business operations, expansions, or investments. The structure you choose can have an impact on the amount of capital available and your ability to attract potential investors.

If you’re looking to raise capital, a Corporation might be the ideal structure for you. Unlike an LLC, Corporations have the ability to issue multiple types of securities, such as common shares, preferred shares, and debt securities. These options can provide you with more flexibility in terms of finding investors and raising capital for your business.

Stability and Credibility

When deciding between an LLC and a Corporation, another factor to consider is the stability and credibility that your chosen structure provides. Generally, an LLC is seen as a less formal and more flexible structure than a Corporation, and therefore is not taken as seriously by investors or potential business partners.

In comparison, a Corporation is seen as more credible, stable and professional. This structure gives potential investors more confidence in the long-term prospects of your business, and can help you to build stronger relationships with clients and business partners.

When selecting between an LLC and a Corporation, understanding the key considerations outlined above is essential. Both forms can provide great benefits, but one structure might be more ideal depending on the type of business, the purpose of the business and the long-term goals of the owners. Taking the time to research and understand the pros and cons of the various structures can help you choose the right form for your business and ensure that it’s being structured in a way that’s right for you.