When you are a business starting entrepreneur, one of the earliest decisions you will need to make is to decide between incorporating as an LLC (limited liability company) or an Inc (corporation). Both corporate structures have advantages and disadvantages, and choosing between the two depends on the nature of your business, as well as other factors. Depending on the nature of your business, legal counsel from a business lawyer located in the United States can provide invaluable advice so you can make an informed decision. Understanding the differences between these two structures can help you decide which is best for your business, and UpCounsel offers access to experienced lawyers who know the local regulations and can help you make the best decision.

An LLC offers more flexibility than an Inc in how it is owned and operated. It allows for easy setup and since it is not taxed separately from its members, income and losses instead ‘pass through’ to the members, who (unlike owners of Incorporated businesses) typically only pay taxes on their share of taxable income. In most states there is no limit to the number of members an LLC can have and it can limit individual liability for business debts or legal judgments against the business.

An Inc, by contrast, is a separate legal entity from its owners and has the power to enter into contracts, incur debt, and sue or be sued in the same way as individuals. It enjoys a higher level of credibility than an LLC and may be more attractive to investors, as it provides shareholders with limited personal liability. Incs also provide a tax advantage in that business income is taxed twice (once at the corporate level and then again at the shareholder level when dividends are paid out).

Which corporate structure is right for your business depends on your business' size, structure, ownership obligations, and goals, such as raising money from external investors. A legal professional can help you determine which is best for you given the nature of your business, the applicable laws, and your desired outcomes. Even if you can’t afford to hire outside legal counsel, understanding the basics of LLCs and Incs can help you make an educated decision.

Business lawyers can help you choose the right corporate structure for your business by considering the company formation requirements and the unique circumstances of your business. The type of corporate structure chosen can have a significant impact on how your business operates, so it is important to take your time in making a decision. UpCounsel provides convenient access to extensive networks of experienced business lawyers in the United States who understand the local regulations and can help guide you through the process of deciding to incorporate as an LLC or an Inc.

Topics:

LLC,

Inc,

Corporate Structure