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The pluses and minuses of corporate and LLC business structures

On Behalf of | Jun 7, 2021 | Business Law And Litigation |

When selecting a business structure, there may be pluses and minuses to consider with each business type. Two common types of business structures are corporations and LLCs which may have different benefits based on the needs of the business. Familiarity with the benefits and potential drawbacks of the different business types can help business owners make important business structure decisions.

Advantages and disadvantages of corporations

Benefits include that the owners enjoy limited personal liability for business debts, judgments and other liabilities; owners may deduct some business expenses; and owners may pay lower taxes with some careful accounting. Corporations can also be more expensive to establish, involve extensive paperwork and the corporation is taxed as a separate entity. Different corporate options may also offer different benefits that regular corporations do not.

Advantages and disadvantages of LLCs

Benefits include that owners enjoy limited personal liability for business debts, judgments and other liabilities even if they exercise significant control over the business. In addition, owners can decide how the LLC will be taxed, as a partnership or corporation, and allocation of business profits and losses may be allocated differently than ownership interests. LLCs are typically more expensive to set up than a sole proprietorship or partnership.

There are different strengths and potential weaknesses to each business form based on what is best for the business venture the business owner is starting. There are a variety of different forms and business owners should be familiar with the benefits of each before making their decision.