What You Need to Know About LLCs as Corporations
Starting a business in Dallas2 min read
Starting a business in Dallas? Deciding whether to form an LLC (limited liability company) or a corporation can be complex. There are important distinctions between them that you should consider before making a decision. In this article, we’ll take a look at the top five things to consider when it comes to forming an LLC and whether or not it is classified as a corporation.
The first thing to consider is the type of entity you’re creating. LLCs are pass-through entities, which means that income and losses are passed through to the members and not taxed at the corporate level. Corporations, however, pay tax on their income at the corporate level. This means that income earned by a corporation is taxed twice, first at the corporate level and then again at the individual level.
The second factor to consider is taxation. LLCs and corporations are taxed differently, with LLCs commonly having pass-through taxation, while corporations are generally subject to double taxation. LLCs are generally simpler to manage than corporations, but they must also make sure to ensure compliance with applicable laws and regulations.
The third important factor to consider when forming an LLC is flexibility. Corporations are subject to a number of rules and regulations that may be time consuming and difficult to manage for some business owners, while LLCs offer much more flexibility. This can allow LLCs to be more creative and agile in pursuing their business objectives.
The fourth factor to consider is liability protection. LLCs offer limited liability protection to its members, which means that the members of an LLC cannot be held personally liable for the debts or obligations of the business. In contrast, shareholders of a corporation are exposed to personal liability for the debts of the company, even though they may not have had any active role in creating those liabilities.
The fifth and final factor to consider is the ease of raising capital. With an LLC, it can be difficult to raise large amounts of money from investors or banks, as it is an unincorporated entity. Corporations, however, can be attractive to investors, as they generally offer a more reliable form of structure and governance.
When deciding between forming an LLC or a corporation, it is important to weigh all of these factors carefully. While the decision is ultimately yours, you should consider speaking with a knowledgeable lawyer about your specific situation. Business lawyers in Dallas who specialize in LLC and corporate law can provide counsel and assistance in making the right decision for your business.