Getting Started on Inc vs LLC: Things You Need to Consider in Los Angeles
Small business owners understand just how important it is to choose the right business structure2 min read
Small business owners understand just how important it is to choose the right business structure. Incorporating, whether as an Inc or an LLC, is an essential step for any developing company, and the choice between these two types of entities can make a big difference down the road. For any business entrepreneurs seeking legal advice from experienced business lawyers in Los Angeles on how to get started on an Inc or an LLC, here is a comprehensive guide on the differences and similarities between the two.
The main difference between an Inc and an LLC is that Inc structures are typically used by larger businesses, whereas an LLC is reserved for smaller entities. An Inc is a for-profit corporation that is generally subject to double taxation on its profits and dividends. An LLC taxes its members as individuals, subject to only one layer of taxation. Therefore, the owners of an LLC are not taxed on the profits of the company, while Inc owners are subject to double taxation.
When deciding between an Inc and an LLC, business owners must consider several factors. The first is the cost associated with setting up and running the business. Establishing an Inc is typically more expensive than an LLC, as the formation process typically involves filing articles of incorporation and registering with the state. As a result, the fees associated with setting up an Inc are typically higher than an LLC.
The second factor to consider is the members’ liability. With an Inc, the owners are only liable for their own contributions to the company, while in an LLC, all the members of the company are subject to joint liability. This means that all members of an LLC are liable if the company is sued, and all members are responsible for the debts of the company.
In addition to liability and cost, the owners of both Inc and LLC structures must also consider the issue of business continuity. With an LLC, the company will continue to exist after any owner leaves the business, while an Inc corporation will dissolve if an owner leaves the company.
Finally, one of the most important factors to consider when deciding between an Inc and an LLC is the number of shareholders. An Inc structure typically has many shareholders, whereas an LLC typically only has two or three. Additionally, an Inc generally has many directors, while an LLC usually has one to two.
Whether forming an Inc or an LLC, business owners in Los Angeles who are seeking experienced counsel from business lawyers must assess which entity would best suit the company’s long-term goals and needs.secured
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