Choice of Entity - Corporation or LLC?


There are many different types of business entities. Historically, the most popular type of entity was the corporation, but now the limited liability company (LLC) has become the entity of choice. The reasons for this shift are that an LLC provides its owners with limited liability protection (like a corporation) and more favorable tax treatment (like a partnership). Since the rights and obligations of owners are largely contractual, an LLC also provides its owners with greater flexibility in structuring management, voting and economic terms. The corporation, however, remains an important entity, especially since it may provide its owners with favorable tax treatment by electing to be treated as an S corporation. As a result, this paper summarizes some of the general advantages and disadvantages of corporations, S corporations and LLCs, and then reviews the more important characteristics of these three types of business entities.

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Gianfranco A. Pietrafesa
Archer & Greiner, PC

I am a business lawyer in New Jersey and New York with substantial experience providing legal advice... View Profile »

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