Should Your Business be a Corporation or LLC?

When you are starting a new business, one of the most important decisions you can make is choosing the legal structure for your entity. Two options most small business owners consider is a corporation and a limited liability company (LLC). Hopefully you have read our previous blogs discussing the governance differences between a corporation and an LLC. Below are a few additional pointers regarding entity governance to consider when choosing the best type of entity for your new business:

  • If you are going to be a single owner of the business, an LLC will be easier to organize and manage. You can essentially operate the business in the same way as you did as a sole proprietor, with a few exceptions.
  • An LLC is also a good option if your business has a small number of owners who are all active in the operations of the entity. Again, the informal nature of the LLC is usually beneficial for a small group that can make important decisions at the member meetings, but there aren’t restrictive formal requirements that must be met.
  • If the business has multiple owners, but only one owner is active in the operations and decision-making, an LLC is again the best choice. The LLC structure allows the members to elect a managing member (named in the operating agreement) to handle the daily operations of the company.
  • If your business will have a large number of owners, a corporation is often the best legal structure. When there are numerous decision-makers, the structured nature of the corporation is beneficial.

The above factors only consider the governance aspect of the business. There are many other factors that should also be considered, including how the entity will be taxed and options for asset protection benefits.

Before you make the decision on how to form your business, contact us for an appointment. The attorneys at Nielsen Law Group can help with all business formation matters. You can schedule your initial consultation by calling (480) 888-7111 or submitting a web request here.