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Registering the Business as LLC or Inc

Now, you can make up your mind on what kind of entity you should register your company. Compare and know if you will be registering the business as LLC or Inc.

When you are on your way to registering your business, you may have already planned on what option it will be.

You could have decided either to register it as LLC (Limited Liability Corporation) or Inc (Incorporation). But while you are in the stage of planning, you should first know the difference between the two so that you will know the difference in forming and registering the business as LLC or Inc.

In the United States, there are actually three primary kinds of entities that business founders consider and these are LLC, C-corp, and S-corp. In order to know which of these options can be the best, you must first know the characteristics of your business and know which is more fitting. You may also know the different pros and cons of each of the options that you have. When making a choice between them, there are actually several primary factors that you need to consider. First, you must ask yourself if you will be seeking for outside investors. If you are going to ask for outside investors’ help then you must also know when. And if ever you have already planned of getting them in the right time, would you be able to generate profit soon after doing so?

Now, let us try to compare these types of entities that we are going to choose from. Let us start with LLC. LLC is easier and cheaper to set up compared with the other entity options. There is a popular belief that LLC is not a legitimate corporate entity but this belief is absolutely not true. You should know the percentage that each member own and each should be defined. If you can get personal liability protection from being a C-corp then you can also get the same by being an LLC. But one of the remarkable qualities that LLC possess is that you have to deal with almost no regulatory BS. This means that your entity will not be subject to the same rules, disclosures, or expensive accounting that you have to adhere when you are a C-corp. Aside from that, you will not also be taxed as an entity when your company is an LLC though the members are individually taxed according to their percentages of ownership in the company.

When it comes to rules, taxing, and expenses, you can surely take advantage having an LLC but the thing that you cannot do is to allow shareholders. You cannot take advantage in having some types of outside investors (usually VCs) especially when there are so many investors who are interested in your company.

On the other hand, choosing a C-corp has its own advantage for you to offer. C-corp being a legally-taxed entity can be you the maximum protection that you need for your company. Now, an S-corp is a C-corp but with special permissions under the subsection of the US Tax [IRS] Code. You can have C-corp at first and ask for an S-election in order for you to qualify.

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11 Comments

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