Corporation and LLC
The advantages of a corporation include the following;
Corporations offer business owners personal liability protection, business security, and perpetuity, access to capital, and, in some cases, and tax benefits as explained below:
A corporation provides more personal asset liability protection to its owners than any other entity type (Mancuso, 2019).
Corporation ownership is based on the percentage of stock ownership, which offers much more flexibility than other entity types to transfer ownership and perpetuate the business for the long term.
Since most corporations sell ownership through publicly-traded stock, they can quickly raise funds by selling stock. This access to funding is a luxury that other entity types don’t have.
A corporation provides more personal asset liability protection to its owners than any other entity type.
Disadvantages of Corporations
Forming and maintaining a corporation can be expensive and time-consuming, and you will likely have to follow rigid formalities and pay double taxes.
Most corporations (like C-corps) face double taxation, which means that the business income is taxed at the entity level and the shareholder level.
Advantages of Limited Liability Company includes the following;
The owners of an LLC have no personal liability for the obligations of the LLC. An LLC is the entity of choice for a business seeking to flow through losses to its investors because an LLC offers complete liability protection to all its members (Mancuso, 2019).
There is less paperwork in LLCs since they don’t have to hold annual meetings and usually are not required to keep extensive records. In many states, LLCs do not need to file annual reports.
LLCs get the best of all worlds when it comes to taxation. LLCs don’t have their federal tax classification but can adopt the tax status of sole proprietorships, partnerships, corporations, or corporations (Clark Jr, 2011).
LLCs have management flexibility since they don’t have to use this formal structure, and an LLC’s owners have more choices about the way they run the business and make decisions.
An LLC’s adaptable and straightforward business structure is perfect for many small businesses.
Disadvantages of Limited Liability Company includes the following;
More expensive to form than sole proprietorships and general partnership,
Ownership is typically harder to transfer than with a corporation.
Income splitting is available, but unlike an S Corp, all income may be subject to payroll or self-employment taxes in a business operating as an LLC.
Some states do not allow professional groups (i.e., doctors or dentists) to operate through an LLC.
Transferability restrictions – consent of membership is required for every transfer of membership interests.
Single Member LLCs face reduced asset protection. Many states do not honor asset protection for LLCs with a single owner.
Purpose of corporation
One of the chief purposes of a corporation entails granting the privilege of harnessing excellent capabilities towards the service required and the sole purpose of maximizing the shareholders’ profits (Mancuso, 2019). Corporate responsibility integrates a united team by creating team building initiatives and making an impact within the community. Another significant aspect of corporate liability entails impacting the community effectively as their economic participation becomes ascertained. The corporation is based on sets of legal entities combined working towards similar objectives and missions (Clark Jr, 2011). The purpose of corporations entailing profit motivation, thus gaining a competitive advantage.
References
Clark Jr, W. H., & Babson, E. K. (2011). How benefit corporations are redefining the purpose of business corporations. Wm. Mitchell L. Rev., 38, 817.
Mancuso, A. (2019). Form Your Own Limited Liability Company: Create an LLC in Any State. Nolo.