LLC Advantages

A limited liability company (LLC) has many advantages as a form of business entity:

• Pass-through taxation - under the default tax classification, profits taxed at the member level, not at the LLC level (i.e., no double taxation).
• Limited liability - the owners of the LLC, called "members," are protected from liability for acts and debts of the LLC.
• With "check-the-box" taxation, an LLC can elect to be taxed as a sole proprietor, partnership, S-corp or corporation, providing much flexibility.
• Can be set up with just one natural person involved or, in some states, one owner which may be an entity itself.
• No requirement of an annual general meeting for shareholders (in some states, such as Tennessee and Minnesota, this statement is not correct).
• No loss of power to a board of directors (although an operating agreement may provide for centralization of management power in a board or similar body).
• LLCs are enduring legal business entities, with lives that extend beyond the illness or even death of their owners, thus avoiding problematic business termination or sole proprietor death.
• Much less administrative paperwork and recordkeeping.
• Membership interests of LLCs can be assigned, and the economic benefits of those interests can be separated and assigned, providing the assignee with the economic benefits of distributions of profits/losses (like a partnership), without transferring the title to the membership interest (i.e., See VA and Delaware LLC Acts).

Corporation Advantages

The most important advantage of incorporation is that it gives its stockholders limited liability. Since the corporation is a separate legal entity, its stockholders are protected from the debts and liabilities of the corporation.

Other advantages:

• A corporation has unlimited life. If an owner dies or sells his interest the corporation will continue to exist and do business.
• Ability to easily establish insurance and retirement plans.
• Ownership of corporation is easily sold or transferred through sale or transfer of stock.
• Capital can be raised through sale of stock.
• A corporation has centralized management which may remain in place after sale of business.