Incorporation vs. LLC: Which is Right for You

As experienced corporate lawyers, we at Holon Law understand entrepreneurs’ dilemmas when deciding between incorporation and forming an LLC. These are two common business structures, but which suits your unique situation?

Let’s explore the key factors. Imagine this scenario: You’re an ambitious entrepreneur with a game-changing business idea. One night, while working on your laptop, you realize it’s time to establish a legal entity for your business.

But as you research your options, confusion sets in. Should you form a corporation or an LLC? You call your trusted corporate lawyer at Holon Law. “I don’t know which structure to choose,” you confess, worried about making the wrong decision.

Don’t worry, you’re not alone. As your legal partners, we’ve guided countless clients through this pivotal choice. We’ll demystify the process and help you select the best business entity for your venture’s success.

Holon Law Partners has 100+ years of combined experience guiding clients through complex cases and legal intricacies. Our approach is empathetic, customized, and client-centered, focusing on you and your unique business needs. To schedule a consultation with us, call our team at  (866) 372-0726 or email us at: info@holonlaw.com. 

Understanding Corporations

A corporation is a separate legal entity from its owners. This means the corporation, not the individual owners, is legally liable for the business’s debts and obligations. Corporations come in different types, including S-corps, C-corps, and non-profit corporations.

Advantages of a Corporation

• Ability to issue stock, which can help raise capital from investors

• Solid liability protection, shielding owners’ assets

• Structure and formalities (board of directors, annual meetings) can provide added legitimacy

The LLC Alternative

A Limited Liability Company (LLC) is a popular choice for small businesses and startups. LLCs blend elements of corporations and partnerships, offering liability protection and tax advantages.

Benefits of an LLC

• Less paperwork and fewer formalities than corporations

• Flexibility in management structure

• Typically easier and less expensive to set up and maintain

• Can choose how to be taxed (sole proprietorship, partnership, S-corp, or C-corp)

Our business lawyers have helped many entrepreneurs establish LLCs for their franchise businesses, minimizing complexity while providing liability protection.

Taxation Considerations

Corporations are subject to “double taxation.” They pay taxes on their profits at the corporate level, and then shareholders also pay taxes on dividends. However, S-corps can avoid this by passing income through to be taxed at the individual shareholder level.

LLCs, by default, are pass-through entities, meaning the business itself does not pay federal income taxes. Instead, profits and losses are passed through to the individual members, who report them on their personal tax returns. LLCs can also elect to be taxed as a corporation.

As corporate lawyers, we take a holistic view of your tax strategy, recommending an entity structure that optimizes your current and future tax situation.

Making Your Decision

Corporations are a good choice for businesses that plan to scale significantly, go public, or attract venture capital. LLCs offer simplicity and flexibility for owners who want liability protection without the formalities.

At Holon Law, we don’t believe in one-size-fits-all solutions. We invest time to understand you, your vision, and your challenges. Armed with this knowledge, our lawyers craft tailored recommendations to set your business on the path to success.

Imagine the relief of having a clear plan forward, reviewing the incorporation documents we’ve prepared, and being confident you’ve made the right choice for your business.

This is the experience we strive for at Holon Law. Our business lawyers, corporate lawyers, and the entire team are committed to being your trusted guides, champions, and partners in prosperity.

Experience the Holon Law Difference

Ready to take the next step? Have questions about incorporation, LLCs, or other business entity concerns? Contact Holon Law today to schedule your consultation.

Together, we’ll craft a legal foundation as strong as your vision.

FAQs About Business Entities

1. What is the main difference between a corporation and an LLC?

The main difference lies in ownership structure and taxation. Shareholders own a corporation, which is a separate legal entity that pays taxes at the corporate level and is able to issue stock. Members own an LLC and offer pass-through taxation, with profits and losses reported on the individual members’ tax returns.

2. Which entity offers more flexibility in management structure?

LLCs offer more flexibility, with customizable management structures in the operating agreement. Corporations have a more rigid structure with a board of directors, officers, and shareholders.

3. How are corporations taxed differently than LLCs?

Corporations are subject to “double taxation,” paying taxes on profits at the corporate level, and then shareholders pay taxes on dividends. LLCs have pass-through taxation by default, with gains and losses reported on the individual member’s tax returns, but can elect to be taxed as a corporation.

4. Can an LLC issue stock like a corporation?

No, an LLC cannot issue stock. LLCs have membership interests representing ownership but not stock shares. A corporation is the better choice if you plan to raise capital by issuing stock to investors.

5. What situations might favor a corporation over an LLC?

A corporation might be better if you plan to scale significantly, seek outside investment, go public with an IPO, operate in a heavily regulated industry or seek government contracts, want to offer employee stock options, or need a formal management structure with a board.

Work With a Corporate Business Lawyer 

Holon Law Partners has 100+ years of combined experience guiding clients through complex cases and legal intricacies. Our approach is empathetic, customized, and client-centered, focusing on you and your unique business needs. To schedule a consultation with us, call our team at  (866) 372-0726 or email us at: info@holonlaw.com.