1. Forming a Corporation

Forming a Corporation

Author: Real Estate Holding Company

Published Jul 17th, 2023Updated Feb 14th, 2024
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While we generally recommend LLCs, there are situations where traditional c-corporations are superior.

What are the major differences? Corporations have existed for hundreds of years, and tend to be more similar than LLCs across the USA. Limited Liability Companies are newer. They came into being in the 1970’s.

Small businesses should look at forming a Close LLC or Close Corporation. They were designed with fewer formalities for families, friends and solo entrepreneurs.

What is the difference between a Corporation and an LLC?

Asset Protection: LLCs have charging order protection. This prevents creditors from seizing your membership interest or force a distribution. This benefit also applies to Single-Member LLCs. Corporations do not enjoy this benefit.

Taxes: Corporations may only be taxed as corporations or s-corps. LLCs may be taxed as a corporation, s-corp, a disregarded entity or partnership.

Privacy: They are similar, but LLCs tend to be easier to keep private. Some states may require additional disclosures for Corporations, e.g. officers and directors.

Corporations have a defined management structure and require a board of directors. LLCs have more flexibility and do not have a board.

Why form a corporation?

There are many situations where a corporation is the most appropriate entity. They are often favored for the flexibility split share classes provide and the defined management structure. Investors in larger companies may also enjoy the oversight a board of directors provides. In such cases, additional meetings and requirements are less a burden than enabler of better governance.

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