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What To Know About An LLC Corporation Concepts

23rd November 2009
By FrankRod in Business Law
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What to know about an LLC corporation concepts becomes particularly important when establishing a business or when preparing to convert of business over from a sole proprietorship or some other entity. There are benefits to either limited liability companies or corporations, for the most part. LLC Corporation and what it can mean when it comes to understanding the differences should be learned.

Limited liability companies and corporations each share a number of similarities. For one, both offer owners and members a number of protections and advantages over other types of business entities. This means that each can extend protection against personal liability and loss of personal assets to members and owners. The LLC is believed to be the more flexible in its structure, also.

Many other experts value the more rigid and structured formation found in the typical corporation, which can make more sense in a number of cases. By law, an LLC is treated as a business entity that is separate from that of its owners. These owners are referred to as "members" rather than as "shareholders, " which is what they are referred to as in a corporation.

Formation of a limited liability company occurs when members file articles of organization with the state in which the LLC will be domiciled or doing business. There are fees that are paid to the state controlling authority upon creation of the LLC and additional steps that will be taken prior to and after the filing. There are three major upsides to limited liability companies.

A big benefit to forming an LLC is that the IRS gives it pass through tax treatment, meaning that any profit or loss is reported on each individual member's tax return. Another benefit is that, just like a corporation, the LLC extends personal liability protections to each member. In other words, creditors and the like can only make claims against the LLC itself.

Never forget that in order to maintain the second benefit members must not make any guarantees or obligations that are of a personal nature rather than those that the LLC makes itself. Lastly, limited liability companies are flexible in how they can be managed. Corporations, though, are much more structured and how they can be managed by their owners and operators.

However, incorporating is looked at as being more permanent in nature by many people and they tend to gain credibility a lot quicker than do limited liability companies. Corporations also tend to be among the most long-lived business entities out there. Many other kinds of businesses must be dissolved when an owner passes away, which is not the case with a corporation. Also, it can raise capital more easily as well as provide a degree of anonymity to owners.

The bottom line is that the decision about creating a limited liability company or a corporation comes down to what sort of flexibility or rigidity in structure and management is more preferred. Those who like extreme flexibility tend to go with an LLC corporation while those who want more permanence and rigidity in management choose corporations. Either way, there aren't very many downsides.
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