In terms of limited liability companies and corporation are two most popular limited liability options available in United States of America.
Limited liability Company:
Limited Liability Company is a legal identity erected to protect the investors from excess liability exposure. It is a hybrid business model which combines the limited liability protection of the incorporation with the tax pass through of the partnership.
Benefits of Limited Liability Company:
Limited Liability Company provides the corporation’s protection excluding the difficult and high cost compliance which are tied with corporations. Limited Liability businesses are not required to have a proper designated managers and formal structures to operate. Though often having a formal business structure can be beneficial for the organization. But if a business is smaller than a certain extend it questions the benefits being less than the cost incurred to acquire that respective benefit.
Taxation is another benefits of the Limited Liability Company as the profit and loss is passed unto the income of the owners and is taxed accordingly. As the income is divided the tax slab is reduced if owners do not have another source of income. Pass through taxation structure was very likable feature in the partnership. It has become a popular choice because individual can have tax benefits of the partnership with a better protection against unlimited liability.
Limited Liability Company provides the organization an option to move their tax treatment from the pass through to the corporation treatment. In certain circumstance corporation treatment of taxation can be more beneficial for the organization.
Drawbacks of the limited liability company is that it is a not a separate legal identity like corporation. Contracts have to be renewed if a certain partner or investor decides to leave the ownership.
Comparatively lessor compliance as compared to corporation can put the business at risk of control failure and misappropriation of assets.
Formation of Limited Liability Company:
Limited Liability Company is formed by more than one members after filing articles of organization and operating agreement. Articles of association are the rules and regulations LLC must abide by to run in the external environment.
Corporation is a classic way of protecting the investors from the unlimited exposure of the liability. It is not a hybrid business model that is why it is differentiated from the likes for Limited Liability partnership .
Benefits of Corporations:
In terms of taxation, often government provide tax benefits and lower rates to the corporations. This can help the organization to gain maximum tax benefit from the government. Corporations are also entitled to several other tax benefits which other businesses fail to acquire.
Corporation compliance can exhibit a more trustworthy image in front of the investors. Eventually this improves the credit standing of the company by getting finance services at a better rate as compared to other business structures.
Corporations are not dependent on the shareholders. Since it is a separate legal identity even if a shareholder or partner leave, the legal identity of the corporation will stand unaffected.
Ownership of the corporation are easily transferable as compare to the partnership and sole trader businesses.
Corporation can tap into stock exchange to raise financing from all over the world.
Corporations are more likely to commit to cost because of extensive compliance procedures. Often smaller corporation which are in a startup phase find it hard to come up with the uprising costs and not so much benefit.
Corporation do not have taxation flexibility like Limited Liability Company and are taxed on corporate taxation. Corporate tax rates are lower than the personal income rates. In certain cases the pass through taxation turns out to be a better option.
Formation of Corporation:
Incorporation is formed by filing corporation organization documents in state regulatory body where corporation is located. Documents include information about designated shareholders and their respective shareholding. Articles of incorporation are used to define the rules and regulation for the corporation:
Primary role experts at WeAccountax can play is to guide the client regarding which Limited Liability Structure is most likely to result in comparative saving.
Our taxation experts pertaining to corporation and personal tax can evaluate the solution help the company decide which business structure is most likely to be the best choice. United States of America has a complicated tax because it pertains to federal and local taxes. Because WeAccountax can cover all ends for the business.
Our payroll services compliance and management system can ensure that, corporation or limited Liability company, both must meet manage their payroll effectively.