Episode description
Is it better to create a limited liability company or establish a corporation? Each has its own pros and cons depending on whether you are an independent contractor, a small business, or a real estate investor. In part 1 of this two-part discussion, Attorney Ted Gudorf explains the key differences between LLCs and S-Corps.
Members make up a limited liability company, or LLC. Any entity or individual can be a member of an LLC, with some notable exceptions being banks or insurance companies. The operating agreement, commonly overlooked, is every LLC’s governing document, listing members and their percentage ownership, as well as capital contributions.
Corporation owners, however, are referred to as “shareholders,” not “members.” For the most part, rigid formalities must be followed in order to enjoy the benefits of the corporation. The bylaws of a corporation are those that provide for shareholders, directors, and officers. In some states, professionals have to use a corporation and not an LLC.
In part 2 of this discussion, Ted will delve into a number of complex issues in designing the limited liability company operating agreement or the S corporation bylaws.
Key Topics:
- What is an LLC? (1:20)
- How LLCs are taxed (6:56)
- What is a corporation? (15:55)
- How corporations are taxed (17:28)
- Choosing between an LLC and a corporation (22:00)
- How about a sole proprietorship or general partnership? (29:24)
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