Last month, we reviewed the differences between corporations and LLCs and how making the selection between the two is an essential early step in creating a new business. If you’re landing on this blog, if you haven’t already, be sure to catch part one, where we explain the different essential items to consider when selecting the best business formation for your individual goals, which include size, management structure, transferability, and ownership.
Now, let’s look at the different advantages of each business structure to offer an even bigger picture of the opportunities available to Georgia business owners.
Advantages of starting an LLC
Flexible Taxation: In the above-mentioned, you can see the flexibility of registering your business as an LLC. With this option, you have room to weigh your tax options and choose the most suitable ways to pay that best fit your business.
Disclosure: LLCs require less disclosure with the secretary of state and, although suggested, do not require annual minutes like a corporation.
Protection: Another important reason to register your business as an LLC is your protection of personal assets against lawsuits. As long as you obey the llc formalities, keep business and personal assets separate, and don’t use the llc as an alter ego, your business can be sued, but you and your individual members would be protected from personal liability
Easy to manage: Managing a single member llc can be easier than managing a corporation. The management structure of a corporation is generally more bureaucratic than the structure of LLCs, and profit sharing can be handled differently. Everybody knows their roles and who gets what when profit is shared. Usually, an operating agreement outlines how the LLC operates and how ownership, (called membership), can be transferred.
Credibility: Although the LLC has only been around for around 30 years in most states compared to corporations having been around for hundreds of years, LLCs are well-established and well understood in the business and legal worlds.
Advantages of a Corporation
Limited liability: Corporations are legal entities, meaning they can be sued without the shareholders getting sued in case of a legal issue. If the business faces litigation, the owners will not face getting sued as individuals. Again, as long as you obey the LLC formalities, keep business and personal assets separate, and don’t use the LLC as an alter ego, your business can be sued, but you and your individual shareholders would be protected from personal liability.
Credibility: Corporations pose as credible entities due to their transparency relating to how they are structured and managed. This type of structure makes it easier for people to invest in the organization and become shareholders.
Transfer of ownership: Shareholders can easily transfer their shares to someone else when they want out of the business. Transfer of shares will also depend on the company’s policies on share transfers, which will be named in the company’s business contracts and other important legal documents.
Leaving a Lasting Legacy: Look at the businesses that have lived for over a hundred years today. Most of those businesses are corporations. They outlived the owners because of their management structure and ability to transfer shares from one shareholder to another. You can opt for a corporation if you want a significant, lasting business entity.
Even seasoned entrepreneurs may benefit from consulting with a specialized attorney when considering a new business formation. Still have questions? Contact us to schedule an appointment to discuss your goals with our team of experienced lawyers. Together, we can help you determine the next legal steps for your business to ensure the best possible outcome.