Should You Choose LLC or Inc. for Your New Business?
If you have questions about starting a new company, talk to a business formation lawyer Sacramento CA offers from the Yee Law Group, PC. Our lawyers work with clients to help them reach their professional goals in a timely and cost effective manner.
At the Yee Law Group, PC, you can talk to a business formation lawyer Sacramento CA professionals have relied on for years. At this stage, you may be wondering if you should form an LLC or incorporate your new company. The following information may be of assistance, and we encourage you to call us for a free consultation with one of our attorneys.
Limited Liability Companies (LLCs) and Corporations (Inc.)
LLCs and Corporations have much in common, but there are some important differences between the two. It’s a good idea to decide which one will be of more benefit to you before moving forward with setting up your company. Before you file the necessary paperwork, a business formation lawyer in Sacramento CA from the Yee Law Group, PC can offer you additional guidance. However, here is what the two business types have in common:
- They are officially formed after submitting paperwork with the state, which then approves it.
- They protect the business owner(s) from liability if the company has financial difficulties in the future, or if the company is sued.
Now let’s talk about the differences between the two.
Profit Sharing and Management
Corporations have a board of directors and shareholders who own stock. Shareholders share in company profits through their stock investments. Investors like corporations because of how easy it is to transfer stock. A Sacramento business formation lawyer can provide more details about the advantages and disadvantages of forming a corporation.
LLCs are less structured. The owners, members, or managers manage the company. The members agree to distribute the profits however they wish. For those who aren’t likely to need or want to raise capital from outside the company often prefer LLCs, due to their flexible management arrangement.
A business formation lawyer Sacramento CA residents trust can help you navigate through the somewhat complex tax laws. In general, corporations can be taxed using either of two methods:
- C corporation. This type of corporation pays taxes based on the amount of profit it makes. In addition, shareholders pay personal income tax on any dividends they receive. This results in dividends being taxed twice.
- S corporation. In this type of corporation, the company doesn’t pay corporate income tax. The profits go straight to the shareholders, who then pay personal income tax based on the amount they receive. If a corporation has more than 100 shareholders, foreign shareholders, or more than one class of stock, then the company can’t qualify as an S corporation.
LLCs with only one member pay taxes as if they’re a sole proprietorship. LLCs with more than one member are taxed as if it were a partnership. The members’ personal tax returns reflect the company’s income and expenses. Each member is responsible for paying taxes on their share of the profits. An LLC can choose to be taxed as a C corporation if it qualifies, or as an S corporation.
Yee Law Group, PC
When deciding between forming an LLC or a corporation, you don’t have to do it alone. At the Yee Law Group, PC, one of our experienced attorneys can sit down with you and guide you through the process. We’re happy to meet with you and your business partners. When you need a business formation lawyer Sacramento CA business owners rely on, call us.