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Different Types of Corporations: Advantages and Disadvantages of Corporations

What is an LLC?

A Limited Liability Company (LLC) blends the aspects of corporations, partnerships and sole proprietorship into a simple and flexible business entity. LLCs offer the same personal liability protection as corporations with few corporate formalities. LLC entities can be used to hold property and transact any type of business. They protect the owners and operators from personal liability similar to a corporation, and they possess the "pass-through" tax benefits of a partnership. Additionally, LLCs do not require the typical formalities that are required when managing a corporation.

Limited Liability Company (LLC)

Many business professionals believe LLCs present a superior alternative to corporations and partnerships because LLCs combine many of the advantages of both. With an LLC, the owners can have the corporate liability protection for their personal assets from business debt as well as the tax advantages of partnerships or S Corporations. It is similar to an S Corporation without the IRS’ restrictions.

What is a Corporation?

A corporation is a legal entity created separately from those who own and operate it. As a separate entity, the corporation's debts and taxes are separate from its owners (shareholders), thereby offering the greatest personal liability protection of all business structure. Corporations also offer tax savings and the ability to raise capital under your business name.

LLC Advantages

  • Protection of personal assets from business debt

  • Profits/losses pass through to personal income tax returns of the owners

  • Great flexibility in management and organization of the business

  • LLCs do not have the ownership restrictions of S Corporations making them ideal business structures for foreign investors


LLC Disadvantages

LLCs often have a limited life (not to exceed 30 years in many states) Some states require at least 2 members to form an LLC, and LLCs are not corporations and therefore do not have stock — and the benefits of stock ownership and sales.

As with the S Corporation listing, these lists are not inclusive. For more detailed information, please be sure to speak with a qualified legal and/or financial adviser.


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