Corporations And Limited Liability Companies

PROS

• A corporate entity is separate and distinct from its owners. The owner's health or legal capacity does not affect the ability of the entity to carry on its business.
• A corporate entity may exist perpetually. The death of an owner does not affect the life of a corporate entity.
• Limited liability for shareholders.
• Incorporation can be done quickly if necessary -- even within 24 hours.
• The laws are mostly settled concerning corporations, both from the point of view of tax and liabilities of shareholders, directors, and officers. The laws are not as settled with respect to LLCs.

• A corporation eliminates the self-employment tax which is a tax payable by individuals engaged in business and by active members in a limited liability company.

CONS

• There may be expense involved in transferring title to assets to the entity.
• Costs of incorporation and ongoing administration. Entities require a separate set of books, bank accounts and tax returns. Filing fees must be paid to the state's appropriate agency.
• Corporations can have double taxation on earnings -- first when earned by the corporation and then when distributed as dividends to shareholders.
• Ongoing legal formalities must be followed.

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