Legal Question in Business Law in Ohio

Re: LLC vs Corp C

Dear Inquirer: Retain an experienced Counsel (Attorney) to guide and assist you further in making the right decision at the outset of your new business venture.

A corporation is a form of business created according to the laws of a specific state or country. It is an artificial entity created by law. The structure of the ownership of a corporation could include individuals or other corporations; however the management must be individuals. Even so, the corporation is recognized by the law as a separate and independent entity from the individuals.

The corporation has traditionally been the first line of defense in any asset protection strategy because of the long record of iron-clad statutes and case law that protects individual directors, officers, managers and shareholders from personal liability. The corporation is an easy-to-use business vehicle because it is a familiar structure in the business world.

The limited liability company or LLC, is an entity that is also legally separate and distinct from its owners. For tax purposes, the LLC is usually treated as a partnership. However, the LLC may elect to be taxed as a corporation if it so prefers. This choice makes the LLC a very flexible option for doing business. Depending upon the circumstances, the partnership tax classification may provide certain advantages or disadvantages. The partnership tax classification avoids double taxation, but you might find yourself paying tax on company income at a ridiculously high personal income tax rate instead of at a lower corporate rate.

As a partnership for tax purposes, the LLC merely files an informational tax return that details the gain and loss of the individual members. The tax liability flows through to the owners. One key advantage to the LLC is the lack of restrictions regarding the type and number of stockholders. To appreciate this flexibility, compare the LLC with using a restrictive S-Corporation. The S-corporation, which also provides corporate liability protection and flowthough tax status, has limitations on both the number and type of shareholders that are allowed. But the LLC is not subject to restrictions on ownership that apply to an S-corporation. The LLC�s greatest advantage is flexibility. It does not require the same degree of formality and record keeping that is demanded of a corporation. It has flexibility in its tax status, it provides solid asset protection benefits; and when your LLC is filed in a state where the law limits a judgment creditor only to a charging order remedy, it becomes the ultimate business entity for many applications and uses.

Retain Counsel ASAP. Good luck.

Sincerely, J. Norman Stark