One of the very first question an individual or group of individuals should ask when starting a new business venture is, “Do we need a business entity?” The answer is almost always going to be a resounding, “Yes.” A business entity, besides shielding the owner(s) from liability, offers many benefits. 

But, which entity type is proper, and which state should I incorporate in? Two of the most common and popular business entities are: limited liability companies (LLC) and C corporations.

There are some fundamental differences between corporations and LLCs. For one, corporations have a much more formal structure that must be followed. There is a board of directors who are responsible for all the major company decisions. Under the board of directors, there are officers who carry out the day to day operations of the company, and then there are the shareholders who actually own the corporation. Corporations must hold board meetings and keep written corporate minutes. Following all of these corporate formalities are important, because failure to do so could result in personal liability, known as piercing the corporate veil

LLCs are much more flexible and less rigid. An LLC has members, much like shareholders in a corporation, but, there is not the rigid heriarchy of management that exists in corporations.  LLCs can be structured as to best fit the needs of  the members. 

But, although LLCs may sound like a one size fits all type of entity, there are concerns that need to be analyzed to determine whether it is in fact the best entity for your needs. Considerations such as investors, the number of owners, and tax implications all need to be considered. This could also determine the proper State to incorporate in. For example, having investors could dictate forming a C corporation in Delaware.  There are also other business entity types, such as: non-profits, S corporations, B corporations, series LLCs, and L3Cs. These are actually types of corporations and/or LLCs.

The fact of the matter is, every business is different and not all entities are created equal. Spare yourself the confusion and headaches and schedule a time to consult with a Business Attornetoday to discuss all the issues when it comes to your business.


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Law 4 Small Business, P.C. (L4SB). A little law now can save a lot later. A Slingshot company.

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