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Should I Register LLC or Corporation?

Asked by: raj - 26 November, 2011
Respected sir,
Thanks for the answer, I want to ask you weather should i register for an LLC or Corporation. I am offering 5% equity to 5 employee and 20% to investor and the rest is mine and probably some of % to venture capitalists.
So, LLC or Corporation, which one will be better?
Answered by: Alec Green - 28 November, 2011
Raj,

Each type of entity has its advantages and disadvantages. It is fair to say that LLCs are typically more flexible and easier to maintain, while corporations are more formal entities.

Keep in mind that an LLC is a pass-though entity, meaning it is not taxed on company level unless you specifically elect it to be taxed as C-Corporation. Corporations are double-taxation entities, meaning the corporation would pay corporate tax first, and then its shareholders will pay their personal tax on dividends. This is true unless the corporation is elected to be taxed as S-Corporation, however that comes with lots of limitations, one of which being restriction of ownership to US persons only (with a few exceptions for some trusts).

With that being said only C-Corporations can eventually be publicly traded, and the fact that corporate ownership is defined by number of shares it typically makes it easier to transfer ownership percentages between shareholders than it is with LLC membership.

To make a better choice I would recommend you to consult an attorney specializing in corporate law.

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