More About LLC Incorporation

LLC stands for Limited Liability Company.

When you incorporate your LLC you can choose one of the following extensions:

• Limited Liability Company
• L.L.C.
• LLC

An LLC is never called a Limited Liability Corporation.

LLC’s are a relatively new type of legal entity that most states have accepted. There are even some states like Illinois that have series and non-series LLC’s. With a series LLC you can have any number of sub-businesses under the main LLC and yet you pay just the one “Series LLC” fee.

LLC’s are very popular. LLC’s account for nearly 80% of incorporations done on our state incorporation sites.

Limited Liability Companies are appropriate for 1-owner/employee businesses that will likely remain small and not add many employees to the business.

Limited Liability Companies, like Subchapter S corporations avoid double taxation by allowing flow through of profits and losses to be accounted for on the individual’s tax returns.

LLC vs S Corp: Similarities and Differences

The two most popular types of corporations we help new businesses form at our incorporation websites are the LLC and S Corp (Subchapter S).

Both of these corporate entities have inherent advantages and some disadvantages. Have a look at this comparison and see if you can’t come up with a conclusion about which type of incorporation is right for your Oregon business.

Some similarities between LLC and S Corporations:

Incorporation creates separate legal entity as viewed by IRS for taxes and justice (legal) system. Offers some protection of personal assets.

Both avoid “Double Taxation”. Profits and loss can be passed through to the personal tax return prepared by the individual. With double taxation the company pays tax and the individual pays tax on the same $.

State level registration.

Some differences between LLC and S Corporations:

LLC’s can have many owners – unlimited.
vs
S Corp restriction is 100 shareholders.

LLC’s can be owned by Non-US residents.
vs
S Corporations must be owned by residents and citizens of USA.

LLC’s can be owned by other corporations or LLC’s.
vs
S Corporations cannot.

LLC’s have no mandated meetings, minutes requirements.
vs
S Corps have mandatory meetings and minutes and other administrative tasks.

LLC owners can assign roles within company as necessary.
vs
S Corporations need a board of directors and other appointments.

LLC’s are slightly more difficult to transfer ownership of.
vs
S Corps can transfer ownership easily through simple sale of shares.

LLC’s don’t have as many tax advantages.
vs
S Corps. (see accountant or lawyer for exact differences)

To summarize… if you’re planning on having new employees added and growing your company and a surge in income as time goes on you probably will be better off with a S Corporation.

The LLC has a lot of flexibility and few administrative tasks to worry about.

If you’re just starting your new Oregon business and don’t know which direction you’ll go or how much you’ll grow and you have a small number of employees (or 1), then the LLC is probably a good choice.

Please read our disclaimer before making any decision on which corporate entity is best for your business. We are not lawyers and we are not giving legal advice, just information.

In summary, while an LLC has a lot of flexibility and relatively lax regulation, an S-Corp is a very sound choice for businesses which expect a high growth, with new employees being added to the payroll and a surge in income in every quarter. Thus, if you are just starting off with a new business, and you are unsure of the potential or direction of growth, an LLC would be the best choice. In case you have a soundly mapped plan for steady growth and fresh infusions of capital investments, an S-Corp with it’s tax advantages and ability to cater to a company with a growing number off employees and complex tax returns is probably the best choice.

Is an LLC the Best Choice for my Oregon Business?

We incorporate many new businesses under the Limited Liability Company (LLC) designation. There’s a good reason for that – there are a lot of advantages to turning your company into an LLC. Here are some:

• Flexibility. Most states allow Limited Liability Companies to register an operating agreement to define relationships between it’s members and operations different from traditional businesses.
• Two Types of Management Possible – LLC’s day to day operations can be managed by either members or managers.
• The LLC is a separate entity from owners, members, managers. If sued -t he business is sued, not the individuals.
• Members and managers can lose no more than their investment in the company, they are classed with the same limited liability that shareholders, directors and officers of the company have.
• Members personal assets: Savings, homes, vehicles, etc are protected from legal action (in most cases).
• An LLC isn’t limited in the type of business it can engage in. Of course the business must be for lawful purposes.
• LLC’s enjoy flexibility in number of members – which can range from one to thousands.
• Members of LLC’s aren’t limited to individuals. Corporations, partnerships and trusts can also become members of Limited Liability Companies.
• Interests in LLC’s can be freely transferred in most US States.
• Most states permit the free transferability of interests in LLC’s.
• Member meetings not required.
• There is substantially less administratively to do for LLC’s than for other corporations.
• LLC’s can choose between being taxed as a corporation or like an S Corporation.
• LLC members can have multiple classes regardless of their investment. Each class can have specific voting weight, shares of profits and losses and distribution.
• LLC’s get more respect than either a sole proprietorship or a partnership.
• LLC’s can get funding easier than an unincorporated company.

There are many advantages of choosing a LLC for your corporate business structure. Don’t neglect to look at traditional for-profit companies and the subchapter s (S-Corp) designation too.