There are a number of factors that should be considered when deciding whether to set up your business as a corporate or limited liability company (LLC). This includes the type of work that you do, the number of employees that you have, as well as various tax considerations.
Deciding to formalize the structure of your company as an LLC or corporation has important implications and should only be undertaken when you have a clear understanding of the pros and cons of each. Once you have a general contractor license, and before filing papers, consider getting expert advice to ensure that you make the right decision for your business.
Choosing a Corporation vs. LLC
An LLC (limited liability company) is a hybrid form of partnership that offers many of the advantages of a corporation and a partnership. Profits and losses can be passed through to owners without the business being taxed, and owners are shielded from personal liability.
A corporation can be taxed, held legally liable for its actions and can make a profit. The main benefit of a corporation is the protection from legal liability while two key disadvantages are the costs to incorporate and the extensive paperwork that needs to be filed. An S-corporation (Subchapter corporation) helps avoid double taxation which is a drawback for regular C corporations.
We find that, for most construction businesses an LLC is the best fit because, while both a corporation and an LLC offer protection for the owner from liability, an LLC offers more freedom in how the business is managed. An example of this is in an LLC’s operating agreement; the company owners can expressly outline the obligations, powers, and rights of the manager and the LLC’s members. These rights, powers, and obligations can also be directly limited if needed.
An LLC also requires fewer formalities than those associated with a corporation. Specifically, annual meetings are not required.
Get Professional Advice and Assistance
If you want to set up an LLC, in Tampa FL can help. They’ll take out the stress, giving you the space to focus on building your business. Their professional, experienced staff have the expertise you need to get your paperwork handled efficiently. They will help you set up an S-Corporation or an LLC, whichever is the best fit for your needs.
They are also available to assist with ancillary services related to incorporating or setting up an LLC such as:
- Corporation Amendments – if any changes are made to the corporation such as changing officers or directors, they need to be registered and recorded the Secretary of State in Florida. Their team will provide fast, stress-free amendment filing so that you can focus on running your business.
- Annual Reports – annual reports are required to be filed every year in order for a Corporation or LLC to maintain their ‘active status.’ Failure to file annual reports can have serious implications, not least of which is a non-negotiable penalty of $400 for late filing which cannot be waived. Additional reinstatement fees and penalties can mean that costs to get your business on solid footing will exceed $900.
- Annual Minutes – When any changes are made to the structure of the corporation (such as amendments, changes of officers, and stock purchases or sales) the business is required to record them either in special minutes or under the annual minutes of the corporation.
Whether you decide on an LLC or a corporation, provided that they are formed and managed correctly, both will protect the business owner’s personal assets. This means that in the event of a claim or lawsuit filed against the business, only the assets that are owned by the LLC or corporation can be attached. If you have any questions, Contractors Reporting Services would like to be of assistance.