LLC or Inc?
UPDATED: Sep 30, 2022
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LLC or Inc?
I am starting an investment firm that invests in startup tech companies. There will
be 2 employees including myself and we will both be paid a salary but I am the
owner. I have an LLC and will be using that business name. Should I keep it an
LLC, change it to an Inc or another business structure? We are located in
Asked on May 7, 2017 under Business Law, Colorado
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 5 years ago | Contributor
An LLC is most likely the best choice. You certainly want a business that limits your potential personal liability for business debts or obligations, so that if the business is sued or owed money, they can't come after your personal assets (in most cases: no protection is perfect): that means an LLC or corporation. In terms of asset protection, there is nothing to choose from between the two--they provide equal protection. They both can give you identical tax treatment (e.g. "pass through" tax treatment as "disregarded entities" with no double taxation, via an LLC which elects partnership tax treatment or an S-corporation). The only difference between the two for all practical closely held company (not alot of outside owners, like shareholders) is that an LLC is a more flexible structure (you can more easily give others, like employees you want to reward, some profit participation and ownership while maintaining control and the right to do a forced buyback of their interest) which also involve less formalities and paperwork, making LLCs the better choice.
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