Save as PDF RSS Feed Subscribe

What is the difference between an LLC and a Corporation?

Insight Michael Moradzadeh Michael Moradzadeh · July 16, 2009

A corporation is made up of three groups of people – the shareholders, the board of directors and the officers, although the same person can hold multiple positions. The board of directors is formally elected by the shareholders and represents their interests. It is the board of directors that hires the officers of the company, also known as the management. The management’s job is to oversee the day-to-day operations of the company. Major decisions, however, require the approval of both the shareholders and the board of directors. A corporate structure is thus a highly organized and rigid structure of governance that can often be quite burdensome. A corporation requires a slew of corporate governance documents that must be frequently updated. It also requires that annual meetings be held for shareholders and the board of directors.

LLC stands for “limited liability company”. Generally it provides the same legal protections from personal liability as a corporation, however it is governed more like a partnership than a corporation. Whereas a corporation’s owners are called shareholders, the owners of an LLC are known as members. An LLC does not require a board of directors or even officers and can simply be managed directly by its members, if so desired. It can also be structured more like a corporation, with managers that are distinct from its owners. LLCs allow for significantly more flexibility than do corporations. For instance, the owners of an LLC can allocate distributions in whichever way they see fit. Even if the ownership of an LLC is split 60/40, the owners can decide to split the profits 50/50 – something that is not possible in a corporation without a significantly more complicated structure.

Continue Reading…

Why form a limited liability entity (Corporation or LLC)?

Insight Michael Moradzadeh Michael Moradzadeh · July 15, 2009

A limited liability entity (a corporation or an LLC) provides both financial and liability benefits. The financial benefits include the ability to deduct more business expenses from annual revenue when calculating taxable income than would be possible without an entity. Forming a limited liability entity also helps protect your personal assets in the event of a lawsuit or from debtors in a situation where your business’s liabilities exceed its assets. This means that as the owner of limited liability company, your personal assets will not be placed at risk because of the actions of your company, as long as the company is kept separate from your personal assets. This requires the corporation or LLC to: 1) make sure the company is adequately capitalized (it has the money necessary to cover the reasonably predictable legal and business responsibilities of the business); 2) that the company keeps clean accounting books and has accounts that are separate from the personal accounts of its owners or employees; and 3) that all legal documents are adequately maintained and the company complies with corporate governance laws.

Also, forming a corporation or llc usually makes it easier for a business to borrow money and to sell all or parts of the business in the future. It is important to note that the longer a business operates without a legal entity, the more complicated and expensive it becomes to transform it into one. For this reason it is very important to form a legal entity as soon as feasible.

Continue Reading…

Counsel to Counsel: Thinking Creatively About the Practice of Law

News May 09, 2009
by Stephen Seckler, Esq. Why would any law firm client be willing to pay more than the agreed upon billing rate? Why would any law firm agree up front to discount its rates for clients who are unhappy with the service they received? Well at least one law firm is banking on being on the winning side of this billing strategy. The firm, The

Continue Reading…

Giant Coke Adopts Pay-For-Performance

News April 25, 2009
Among large corporations, the compensation model for vendors is changing from hourly or even flat fees to pay-for-performance. That is going to change lots faster now that giant Coke has adopted the value model. In AD AGE, the bible of the marketing industry, Jeremy Mullman and Natalie Zmuda report: "Coca-Cola Co. is trying to start an

Continue Reading…

Rimon Announces Israel Transactions Practice Group

News March 25, 2009
Silicon Valley, California, March 26, 2009 --(PR.com)-- Rimon Law Group, Inc. is launching a practice group dedicated to serving Israeli companies and entrepreneurs doing business in the United States. According to one of Rimon's Managing Attorneys, Michael Moradadeh, Israeli companies and citizens see the United States as a key market for

Continue Reading…

How Hi-Tech Start-Ups Can Survive the Economic Crisis

News March 14, 2009
MICHAEL MORADZADEH , THE JERUSALEM POST The economic crisis has shaken up the start-up and hi-tech community, with the credit crunch squeezing the life out of many small companies. However, crisis is often a powerful breeder of innovation, and with the stimulus bill pumping $787 billion into the US economy, there are powerful openings for

Continue Reading…