LLC or Inc., Which is better - United Business Credit

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Choosing a LLC or Inc is more than deciding which abbreviation will look the most impressive at the end of your business's name. When you choose how to structure your business, you are determining how it will be taxed and liability. Neither of these considerations should be taken lightly. United Business Credit can help you sort through the differences and guide you to the right choice for you and your business.

LLC - Limited Liability Company

Unless you have plans of going public with your business, a LLC may meet all of your company's needs. Here are some considerations:

Liability protection for business owners.
Personal assets are not at risk. The company itself is liability, not the individual owners. By contrast, owners of a partnerships or sole proprietorships may be forced to use their personal assets to settle business debt.
Taxes are limited to the business itself.
Whereas federal taxation of "C" corporations extends to the dividends of the shareholders, in LLCs only the business itself is taxed. In effect, corporations are taxed twice - once for the corporation itself and then again for the individual shareholders. Not so with the LLC.
Here's a word of caution: Each state has its own statutes that govern the taxation of LLCs, so make sure you understand the tax laws for the states where you plan to do business.
Less paperwork.
Corporations are required to file end of the year reports, including minutes, shareholder notifications, etc. LLCs require no such annual reports.
Flexibility
The types of rules and regulations that dictate a corporation's organizational structure do not apply to LLCs. In fact, overall, LLCs tend to be more informal than corporations.
State Regulations
Each state has its own unique requirements and costs associated with LLCs. For example, in some states, it costs more to launch a LLC than to incorporate a business, while in others the cost is the same. You may also find that some states charge an annual fee for LLCs. An even more significant consideration is that some states require an LLC to have at least two partners.

Inc. - Incorporations

In some instances, you may find that a corporation best meets the needs of your business. This may be especially true if your goals include going public. The two types of corporations are "C" and "S", though "S" corporations are the most common type with new businesses. Here are some considerations:

Attractive to Venture Capitalists
Since both "S" and "C" corporations have the potential to be publicly traded, venture capitalists are more inclined to invest than in a LLC.
Taxes Vary Between "S" and "C" Corporations
The taxation of "S" corporations is similar to that of LLCs, meaning that only the business is taxed. By contrast, in "C" corporations, both the business and the shareholders may be taxed. To learn more about "S" corporations and "C" corporations, please click here.
"S" Corporations limit shareholders
While "S" corporations are good choices for small, new businesses and are increasingly popular, the number of possible shareholders in a "S" Corporation is limited to 35. Perhaps an even more significant limitation is that a shareholder cannot be a foreigner.
Paperwork
Compared to LLCs, corporations require more paperwork including articles of incorporation, minutes from meetings of shareholders, corporate directors and so on. Furthermore, every major decision must be properly documented.
Admittedly, choosing the structure for your business can be one of the most important decisions you will make since it can dictate future day to day operations. United Business Credit can help you make the right choice.