Got a Business Idea? Should you form an LLC or a Corporation?

If you have an idea for a product or service that people want or need, it may be a good idea to start your own company. However, there are many questions that you need to ask yourself prior to starting that business. One of those questions is whether to structure the company as a corporation or an LLC.

What’s an LLC?

An LLC is s limited liability company. While it may be taxed like a corporation, the LLC is not a corporate entity. Therefore, there is generally no need to have a shareholders meeting, keep minutes of that meeting and put yourself in danger of being taxed twice on earnings. For these reasons, most small business owners may benefit more by forming an LLC as opposed to a true corporation.

What Are the Benefits of a Corporation?

One of the key benefits of starting a corporation is that it adds a degree of legitimacy to your business. It also shows that the company is going to be around for the long haul as the cost to start one is generally only worth it to serious business owners. Corporations may also have the added benefit of having different classes of shareholders. This may make it easier to raise funds without having to necessarily cede power.

It May Be Easier to Sell a Corporation

While there may be a variety of tax and other consequences when selling a corporation, most attorneys and other relevant professionals are familiar with those rules. Therefore, it may be easier to provide advice as to how to structure a deal. Furthermore, buyers may be more inclined to purchase a corporate entity as opposed to an LLC because of its ownership structure.

How Do You Decide Which One Is Right for You?

As with anything relating to business, it is important to look at as much data as possible when making a decision. Professionals such as doctors or dentists may benefit from an LLC as they may be more concerned with limiting their liability. However, small businesses that make a profit may want to be a corporate entity as it may allow for greater flexibility from a tax and financial standpoint. LLCs are also ideal for those who are looking to hold real estate or other assets outside of their estate. It therefore may be a good idea to talk with lawyers in Sydney like Prime Lawyers or if you’re based in a different region or country, get a referral or do a ‘search’ on ‘specialist business law lawyers’ and then follow up with due diligence.

Starting a business may make it easier to gain control over your career and disrupt the market at the same time. Whether you choose to go with an LLC or a corporate entity, make sure that you understand what each structure is and the pros and cons of using it.