To form an LLC or a start a corporation?

Not sure if you should form a PA LLC or set up a corporation instead?  Maybe you’re already in business as a sole proprietor and looking to take advantage of what an LLC or corporation can offer you.  This blog post will review some of the differences and similarities between limited liability companies and corporations.

Incorporating your business will likely be best if you are planning on selling stock in your company.  Usually companies make stock available for sale through an IPO, or Initial Public Offering.  Though stock can also be sold to investors if you are a private company as well.  But you have to be a corporation in order to sell stock.

Limited Liability Companies cannot offer stock, but they can also include investors’ contributions if they want to.  You can add owners (known as LLC members), depending on your PA LLC Operating Agreement.  The Operating Agreement is an official contract which defines each member’s contributions to the business.   Some members can contribute “sweat equity” and others may act more like silent partners.  It all depends on how you want to set up the organizational structure of your LLC.  With a limited liability company, you have the flexibility to define member roles, responsibilities, and distributive shares.

Even if you’re not looking for investors, there are a few other things to consider when comparing an LLC vs Corporation.

A corporation’s organizational structure requirements, for instance, is much more rigid.  Corporations must elect a Board of Directors and Officers to run the company.  They are also required to hold annual meetings and record meeting minutes.  Limited Liability Companies do not have to hold meetings, take minutes or elect a Board.  LLCs have greater flexibility than corporations in these aspects.  And as a result, LLCs are less expensive and less time consuming to start and maintain.  This is a major advantage for many Pennsylvania small business owners.

Both corporations and Pennsylvania LLCs protect owners’ personal assets.  Corporate shareholders and LLC members alike benefit from limited liability.   That means that if the company is involved in a lawsuit, the courts cannot go after the owners’ personal property like their homes, cars, and retirement investments.  Limited liability protection is an important incentive for business owners to either incorporate or form an LLC in Pennsylvania.

Another key difference between corporations and limited liability companies are the documents you need to file to form them.  Corporations require filing Articles of Incorporation, drafting of Corporate Bylaws, as well as issuing stock certificates and maintaining a stock ledger.  Limited Liability companies can be started by filing the LLC Formation Documents.

The PA LLC Formation Documents are fairly simple to fill out, and many people opt to do it themselves.  The most important thing about filling out the LLC forms is to make sure that they are completed and filed properly.

That’s where we can help you!

With our LLC Formation Course, you will get lifetime access to both the LLC formation documents as well as access to detailed, step-by-step video lessons that take you through each line of all the documents.

When forming an LLC in PA is the right step for your business, let us teach you how.

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