There are several business structures available and many business owners have trouble choosing the right structure for their business. This article should help you understand the difference between a Corporation and a Limited Liability Company (LLC), as well as, why operating as an LLC might be best for you.
If you are in business for yourself, there are many good reasons to form an LLC or corporation. But, perhaps the most frequent reason why business owners choose to operate as either a corporation or LLC is personal asset protection.
If you are operating as a sole proprietorship or general partnership and someone brings a successful lawsuit against you, your personal assets may be at risk. In the worst case scenario, you could lose everything to a successful lawsuit against your company.
But, properly operating and managing your company as a corporation or LLC will be like having a wall between your business activities and your personal property. Your personal assets will be considered separate from your business activities and beyond the reach of your business liabilities.
Most business owners, although familiar with the terms, are not clear on the difference between a corporation and all LLC. In fact, many believe that an LLC is simply a specific type of corporation. But this is not the case.
Although corporations and LLCs share some fundamental aspects, they are two distinct types of business entity structures. Here is a brief overview of the two most important similarities and differences between LLCs and corporations:
An LLC business structure can be considered an alternative to a corporate business structure. One that combines the corporate advantage of limited liability with the partnership advantage of pass-through taxation. An LLC allows business owners to form a legitimate business that combines the asset protection of a corporation with the simplicity of a partnership, making it one of the most popular business entity structures for small businesses in the US.
In addition to the personal asset protection and pass-through tax advantage, the LLC business structure offers a number of other benefits, including:
If are you concerned about how your business liabilities could affect your personal assets and want to enjoy the pass-through tax advantage of a general partnership, as well as, enhanced credibility? Then you should consider forming an LLC.
When considering different business structures, it is important to look at the benefits and risks of each structure, weigh them against the needs of your business, and choose the structure that fits your business best. This will often require the assistance of an experienced business law attorney who can help you properly assess your business's needs and the obligations you will need to fulfill in order to operate under the chosen business structure.
For more information, or for assistance forming an LLC in New Mexico, contact an experienced New Mexico business law attorney today.