For most, the American dream is to own your own small business. What kind of business structure will you use? Unlike the old days of partnership vs. corporation question, today's litigious society has high regard for asset protection, it's LLC vs. incorporation.
LLC does not stand for Limited Liability Corporation, as many people think. It is a Limited Liability Company. It's the old Ltd. in England or the GmbH in Germany reincarnated in the United States
LLC was introduced in 1977 and has become more and more popular Why is the decision of forming an LLC vs incorporating today in favor of the LLC?
Asset Protection LLC vs Inc.
As far as the "corporate shield" is concerned, the asset protection of a corporation and an LLC is the same. The corporate shield protects the directors, shareholders, and officers from the acts of the business.
In either instance the LLC versus incorporation asset protection shield, aka, corporate shield, should form a barrier between the company, its members and its managers.
Note that the language in the LLC vs. inc. world is different. Here are a few of the term differences.
Corporate vs. LLC Terminology
Corporate - LLC Shareholder - Member Officer/Director - Manager Stock- Membership Interest Dividend - Distribution Articles of Incorporation - Articles of Organization By Laws - Operating Agreement
In your effort to make the important incorporate vs. LLC decision, you need to know the LLC offers a form of asset protection that the corporations doesn't. The LLC will protect the company (LLC) from your personal liabilities.
It's called a "charging order" protection. The charging orders carryover from the old English laws that attempted to protect partners from the personal acts of one of the other partners.
Your lawyer and other internet sites may never mention charging order protection. But, I've seen many people lose their business through a divorce, a bad personal real estate deficiency judgment, or other personal disaster.
This is important and should weigh in heavily on your decisions about incorporating versus LLC structure formation. After all, you're setting up your business entity structure for the asset protection.
Taxes LLC vs Inc.
Taxes are usually not a valid point in your LLC versus Inc. decisions. I'm often asked the differences between LLC and S corporation. Many think LLC is a pass through entity just like an S corporation.
They're right and they're wrong. Depending upon how you want your LLC to be taxed, an LLC can be a pass through entity or not. First you set up the LLC. Then decide how it will be taxed. Although LLCs contain the same legal structure, they are taxed under different sections of the IRS Code. It just depends on what options you choose.
If you can choose how to have your LLC taxed, taxes shouldn't have any input into the decisions of LLC vs. Inc.
It is important to maintain your entity structure or it won't protect you in the Incorporated vs. LLC battle. Obtain all the facts up front and make an informed decision It won't be easy, but know you can change down the road if needs be if you discover you made the wrong decision.
The problems begin as you walk into the attorney's office and say, "Hi. Here I am Mr. Attorney. I need a corporation. Set me up." The attorney will incorporate you without any discussion. They want you in and out of their office.
Whether you get the corporation or the LLC, you won't get help with the tax decisions. (How do you want your LLC taxed? How will you make the most money?) You won't get training on the care and feeding of your entity. The bottom line is the lawyers and the web sites only get you half way there. They may help by filing the state forms and maybe getting an operating agreement or bylaws. This does not give you the protection you need when you're standing before a judge.
The courts can only protect you if you follow the laws.. You must know the laws to follow them. I am here to teach you how to protect yourself by following the law. .
An attorney is expensive and the internet is only interested in taking your money to pay the state filing fees. I am willing to help you understand these legal matters and teach you how to protect yourself.
LLC does not stand for Limited Liability Corporation, as many people think. It is a Limited Liability Company. It's the old Ltd. in England or the GmbH in Germany reincarnated in the United States
LLC was introduced in 1977 and has become more and more popular Why is the decision of forming an LLC vs incorporating today in favor of the LLC?
Asset Protection LLC vs Inc.
As far as the "corporate shield" is concerned, the asset protection of a corporation and an LLC is the same. The corporate shield protects the directors, shareholders, and officers from the acts of the business.
In either instance the LLC versus incorporation asset protection shield, aka, corporate shield, should form a barrier between the company, its members and its managers.
Note that the language in the LLC vs. inc. world is different. Here are a few of the term differences.
Corporate vs. LLC Terminology
Corporate - LLC Shareholder - Member Officer/Director - Manager Stock- Membership Interest Dividend - Distribution Articles of Incorporation - Articles of Organization By Laws - Operating Agreement
In your effort to make the important incorporate vs. LLC decision, you need to know the LLC offers a form of asset protection that the corporations doesn't. The LLC will protect the company (LLC) from your personal liabilities.
It's called a "charging order" protection. The charging orders carryover from the old English laws that attempted to protect partners from the personal acts of one of the other partners.
Your lawyer and other internet sites may never mention charging order protection. But, I've seen many people lose their business through a divorce, a bad personal real estate deficiency judgment, or other personal disaster.
This is important and should weigh in heavily on your decisions about incorporating versus LLC structure formation. After all, you're setting up your business entity structure for the asset protection.
Taxes LLC vs Inc.
Taxes are usually not a valid point in your LLC versus Inc. decisions. I'm often asked the differences between LLC and S corporation. Many think LLC is a pass through entity just like an S corporation.
They're right and they're wrong. Depending upon how you want your LLC to be taxed, an LLC can be a pass through entity or not. First you set up the LLC. Then decide how it will be taxed. Although LLCs contain the same legal structure, they are taxed under different sections of the IRS Code. It just depends on what options you choose.
If you can choose how to have your LLC taxed, taxes shouldn't have any input into the decisions of LLC vs. Inc.
It is important to maintain your entity structure or it won't protect you in the Incorporated vs. LLC battle. Obtain all the facts up front and make an informed decision It won't be easy, but know you can change down the road if needs be if you discover you made the wrong decision.
The problems begin as you walk into the attorney's office and say, "Hi. Here I am Mr. Attorney. I need a corporation. Set me up." The attorney will incorporate you without any discussion. They want you in and out of their office.
Whether you get the corporation or the LLC, you won't get help with the tax decisions. (How do you want your LLC taxed? How will you make the most money?) You won't get training on the care and feeding of your entity. The bottom line is the lawyers and the web sites only get you half way there. They may help by filing the state forms and maybe getting an operating agreement or bylaws. This does not give you the protection you need when you're standing before a judge.
The courts can only protect you if you follow the laws.. You must know the laws to follow them. I am here to teach you how to protect yourself by following the law. .
An attorney is expensive and the internet is only interested in taking your money to pay the state filing fees. I am willing to help you understand these legal matters and teach you how to protect yourself.
About the Author:
Want to learn more about professional llc vs llc or c corp vs s corp vs llc? Learn money saving and other LLC tips at LLC Wizard.com