Business Corporations

Advantages

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  • Corporations have been in existence for a couple of centuries. They have structures that are commonly understood and are subject to very extensive and time-tested regulations in each state.
  • They offer some advantages not available to the LLC entity that is taxed in normal LLC tax classifications:
    • A business that wants to reinvest its profits in the company for expansion or other reasons rather than have the profits distributed to the owners may do so with a C Corporation but not a pass-through tax classification of an LLC;
    • A C Corporation may deduct certain employee benefits (like reimbursement of medical expenses or payment of medical insurance premiums) and such payments are not taxable to the employees. With an LLC, these payments are included as taxable income to the members;
    • It is easier to create profit-sharing arrangements or stock options plans in a corporation than in the LLC structure;
    • It is easier to raise capital from outside investors with a corporation than an LLC because of the well-established regulatory structure of corporations. The LLC entity type has only been widespread in the United States in the last 15 to 20 years and there is less state statutory regulation and more dependence on a written operating agreement as the governing document of the parties.
    • If it is anticipated that a business will eventually go public, the C Corporation structure would be a necessity.

 


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