For each of my current businesses, setting up an LLC was the right choice. Here’s a quick rundown of how and why I chose an LLC vs. S Corp.
First, a little background:
Corporations and LLCs are both excellent structures for business owners looking to minimize their personal liability (protect the stuff they already own) and build greater credibility in their respective marketplace (look like they know what they’re doing).
Setting up an LLC or corporation formally sends a positive message, and presents a good solid business image. As it is often said, “perception is reality”.
Each structure also offers distinct tax and business growth advantages. Choosing the right structure depends on the specific needs, and the intent of your business.
For example – A business that is larger in scale like a professional services organization and has 100s of people involved will need a very different business structure than one that operates on a small scale with just a few people involved.
Corporations offer personal liability protection (protect your stuff and you from legal actions regarding the business), tax savings, and increased opportunities for raising capital.
However, corporations are also required to perform certain formalities such as holding annual meetings, and keeping detailed corporate records (minutes). I am not a
big fan of the complexities of corporations.
Limited Liability Companies (LLCs) offer the same personal liability protection as a corporation, but with fewer of the corporate formalities.
The 3 Main Reasons I chose an LLC
1. LLCs are typically not required to hold formal meetings
2. LLCs are not required to keep detailed corporate minutes
3. LLCs offer great tax flexibility. “Members” can choose to be taxed as either a traditional corporation, or as a “pass-through” entity
The day-to-day operations of running a business are challenging enough. In my 30 years of business experiences, I have participated in several entities including C corporations, sole proprietorships, S corporations, and LLCs. Setting up an LLC was absolutely the way to go in most cases.