If you are in the process of launching a new business, there are many decisions to be made. One of which is whether you need an LLC, or if another type of legal business structure would better suit your company.
There are different kinds of legal entities for business owners to consider, each of which provides a different set of protections for the business owner’s interests and liabilities. So which is the best legal structure to protect your interests and assets? The answer to that question is dependent on a number of factors.
Here is a basic breakdown of the differences between an LLC and a Corporation (C-corp or S-corp).
LLC — A Limited Liability Company (LLC) can protect your personal assets from lawsuits or debts that arise from your business. For example, if you own a business that has public traffic, an LLC can protect your personal assets from lawsuits in a potential slip-and-fall situation. Additionally, an LLC can protect you from being personally liable for business debts or unpaid bills.
LLCs are ideal for small businesses and businesses that hold property — such as real estate — that is expected to increase in value. Some businesses cannot operate as an LLC. For example, businesses in the banking, trust and insurance industry are generally prohibited from forming an LLC.
Corporation — A corporation can also provide limited liability for the business owner while offering additional benefits. A corporation may be a better fit for your business if:
• You plan to have multiple investors in your business or plan to raise money from the public.
• You’d like to provide fringe benefits to owners, such as health insurance.
• You want to offer stock options and stock bonus incentives to employees.
Determining what type of business structure is best can be a difficult and complex decision. Need more help determining the best fit for your business? Hire a small business lawyer to help you make the right choice. Contact the experienced legal team at The Law Offices of Tim O’Hare for help with your business formation decisions.
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