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The difference between LLCs and corporations

Ask the LDA

So you have a new business...what form should it take? Is an LLC better than a corporation? Or maybe a sole proprietorship or a partnership? This article will help you understand the differences between the popular LLC and a corporation.

LLCs are gaining popularity as the choice of business structure because they have by far fewer formalities compared to corporations. They keep the same accounting practices and keep accurate books, but the LLC can structure it's Operating Agreement to require as many formalities as it wants. The LLC can decide if it wants an annual meeting or it doesn't. It can decide not to elect a Board of Directors or just have members run the LLC.

Like a corporation, an LLC offers limited liability to its owners. Most LLCs have protection from creditors for its members. LLCs can structure pretty much however they want. Since an LLC Operating Agreement can help with disputes between members, it is ideal for a one person or family-owned business.

First step is to check with the California Secretary of State on name availability. Names can be tricky. So be sure you check first. Second you file the company name with the Secretary of State. Within a few days you will get confirmation that the company name has been accepted with the actual filing. Now you are ready to prepare your operating agreement, make a few resolutions to open bank accounts, get an employer ID number and you are all set.

Paperwork like this can be overwhelming for the average person so if you need help, call me!

This article is not intended to offer legal or tax advice. If you are unsure what type of business entity is right for you, contact you accountant or business attorney.

Diana Wade is a Legal Document Assistant. She can be reached at (661) 821-0494 or [email protected]. Diana is not an attorney; she can only provide self-help services at your specific direction. Kern County LDA #185, ex 4/11/25.