Pros and Cons of Forming a Corporation

The Corporation is also frequently used for many of the same reasons that an LLC is used.  Most importantly, it offers protection of your personal assets.  

 

Forming a corporation does require the filing of documents with the Secretary of State as well as payment of a fee.  However, the documents that must be filed to form a corporation are not as simple as the document required to file an LLC. You are strongly advised to seek legal counsel in the preparation of your corporate documents.

 

Tax-wise, becoming a corporation can result in greater tax liability, depending on the type of corporation you select. It is possible, however, to set up your corporation for status as a pass-through entity for tax purposes so that you avoid the double-taxation of certain types of corporations.  

 

Some people are of the opinion that a corporation is the entity of choice for would-be investors. This is debatable, however, as an LLC is also generally attractive to investors. Obviously, if you have any intention of one day going public, you will need to be a corporation at that time.  Further, unlike an LLC, which ceases to exist if its members die or dissolve the LLC, a corporation has greater continuity of existence.

 

*This article is for informational purposes only.  It is not guaranteed to be a complete or thorough analysis of the issues discussed herein. It in no way shall serve to create an attorney-client relationship. The reader is advised to check for changes to current law and to consult with a qualified attorney on any legal issue.

HSO Law

433 N. Camden Dr. Suite 600

Beverly Hills, CA 90210