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
Thank you,

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.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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