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When choosing an organizational form, two important options to consider are the limited liability company (LLC) and the corporation. Only the LLC and corporation offer the protection of full limited liability to all of the owners of the business in every state.
For tax purposes, the IRS treats the LLC as a sole proprietorship when there is one owner, and a general partnership when there are two or more owners, unless an election is made to treat the LLC as a corporation.
Today, all states allow one-owner LLCs. In addition, there is no tax reason that would require an LLC to have a life of a fixed duration, as once required in some earlier versions of certain state LLC statutes.
Starting an LLC or starting a corporation is done by registering with state authorities. Some consideration should be given to whether the company will conduct business across state lines. If so, foreign qualification may be necessary, including the selection of a registered agent.
Generally, these two forms provide the greatest levels of asset protection, compared to the other entity options. Expanding on this discussion, we examine the relative advantages of the LLC and the different types of corporations, in order to explain in greater detail why these are your best organizational choices as a small business owner.
Of the types of corporations, the statutory close corporation offers unique advantages.