The Difference Between LLC Articles Of Organization And Articles Of Incorporation
So you want to create a new company but are not sure whether to make it a limited liability company (LLC) or a corporation. Thus, you are torn between writing Articles of Organization and writing Articles of Incorporation. How does one resolve this situation? The first thing you have to bear in mind is that a limited liability company and a corporation are two different types of companies. A limited liability company is also known as a limited liability corporation the two are one and the same thing. A limited liability company or LLC will necessitate writing of articles of organization. To set up a corporation, one must write articles of incorporation. Clear so far?
An LLC is similar to a corporation in that both types of organizations restrict the liability of company members to the assets they have invested in the enterprise. Both organizations require a formation document to be written (i.e. the articles of organization and articles of incorporation). Both organizations also need a governing document to be written an LLC will need an operating agreement while a corporation requires bylaws.) Another way that LLC is similar to a corporation is that other documents in both organizations may also be similar (such as papers indicating ownership interests and minutes of organization meeting.)
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One major difference between an LLC and a corporation is that an LLC generally requires less paperwork for maintenance. Many people would say that it is preferable to set up an LLC than a corporation. In addition, an LLC can opt to be processed for taxation like a corporation then filing again for an S corporation status this allows the LLC to secure the benefits of pass-through taxation which a corporation might find difficult to attain. Still, in certain states, the benefits of filing as a corporation by writing articles of incorporation outweightoutweighed advantages of the company filing as a limited liability company. For example, in certain states, there are laws prohibiting certain types of businesses from becoming LLCs. Businesses operating in the banking, trust and insurance industry, in particular, are barred by law from filing as LLCs. To be able to comprehensively determine the nuances of the advantages and disadvantages of an LLC compared to a corporation, you may have to take advantage of the expertise of a business lawyer.
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