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What's Right for Me?

LLC or C Corp
LLC
A great choice for e-commerce stores, bootstrapped startups, and small online projects. LLCs offer limited liability for founders, simple structure, and ease of management.
C Corp
Ideal for businesses seeking to raise venture capital. C Corporations also provide limited liability for founders. The ownership of the company is expressed in shares of stock. These shares can be used to raise money and issue employee options.

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LLCs are organized under an Operating Agreement, a contract between owners ("members") with articles of organization specifying how the business will be run and how costs and profits will be shared.

Structuring an LLC is a relatively open-ended process – the articles of organization are a product of the members’ discretion. Needless to say, this has its pros and cons, as so much relies on the Operating Agreement and all parties involved must always be considered, which can be a recipe for a headache. Corporations, by comparison, are more standardized. Features of an LLC include:

Limited liability for founders; moving liability for debts and obligations of the business from the entrepreneurs into the company itself. Pass-through taxation which allows LLC's owners to pay personal income taxes on the income of the business

  • Limited liability for founders; moving liability for debts and obligations of the business from the entrepreneurs into the company itself.
  • Pass-through taxation which allows LLC's owners to pay personal income taxes on the income of the business Corporations are structured based on the principle that control and ownership can be separate. Owners are called shareholders and they may or may not be involved in the day-to-day operations of the company. Ownership of the business is tracked by shares, with each share corresponding to a defined portion of control of the business and of entitlement to profits.

Many well-known companies are Corporations. Any individual can own shares at one of these companies without having any responsibility for working there. Features of a Corporation include:

  • Corporations provide limited liability because shareholders are generally not individually liable for the debts and obligations of the company.
  • Corporations must pay corporate taxes on their own profits (and have extensive filing obligations). Shareholders are taxed separately, if the company distributes dividends to them (or if it pays them a salary, in the case of employee owners).
  • Corporations are generally most suitable from an investor’s perspective because their structure is designed to distribute ownership. Corporations adhere to a standard structure for the distribution of options to buy that stock, which can then be used to attract, retain, and incentivize key talent, contributing to the success of the business.