California Business Lawyer Blog

Differences Between Corporations and LLC's
Due to the comparative complexity of starting and managing a corporation, businesses should carefully consider whether their needs will be better served by forming as an limited liability company (LLC), or even as a partnership or sole proprietorship.

The LLC does not require annual meetings, and is generally simpler to create, own and operate. An LLC may also have greater flexibility in allocating business profits between its members than does a corporation says california business lawyer Steven C. Peck. If a C Corporation has profits, it must pay corporate income taxes on those profits, whereas the profits of an LLC pass through to its members who individually report their share of the profits on their own tax returns. (Like LLC's, S Corporations also have pass-through profits.)

Corporations have advantages over LLC's in the respect that they are able to issue stock, and possibly stock options, to key employees and investors. There may also be tax advantages associated with having the corporation retain some of its own profits, even with the payment of corporate income taxes, over having all of the annual profits distributed to the owners and investors indicates california business attorney Steven C. Peck.
For people who wish to pass their businesses or investments to their children, there are advantages and disadvantages to using the corporation or an LLC for purposes of estate planning and wealth transfer. Those issues should be discussed with a qualified estate planning professional prior to choosing a business form for that purpose.