From the stability prestige brings to finding more ways to gain capital, here are six answers to the question, “What are the best advantages of having a corporation vs LLC for your business?”
- Gain Prestige and Stability
- Provide Continuity
- Attract More Investors, Lenders
- Incur Limited Liability Protection
- Have a Flexible Ownership Structure
- Raise Capital Through Sale of Stock
Gain Prestige and Stability
One benefit of having a corporation is offering prestige and stability that an LLC cannot match. You can issue stocks, raise capital from the public, and have limited liability protection. For example, Apple Inc. raised over $100 million during its IPO, which allowed them to fund research and development for its groundbreaking products.
A corporation’s stability helped Apple become one of the world’s most valuable companies. Forming a corporation can help you pursue your goals and unlock new opportunities if you’re an entrepreneur or business enthusiast.
Paw Vej, Chief Operating Officer, Financer.com
If you’re a serial entrepreneur, it’s essential to register your business as a corporation. While legal fees for this process are pricey, it’s worth it because it allows your business to continue to exist even as its owners and shareholders change.
Many entrepreneurs start businesses intending to sell them after reaching a point of profitability. They then take the profits from selling their company to fund new startups and projects. With an LLC, when an executive team member leaves a company or dies, the business has the chance to dissolve.
Sacha Ferrandi, Founder and Principal, Source Capital
Attract More Investors, Lenders
Generally speaking, a corporation will appeal to more lenders and investors because corporations have a more well-established legal and regulatory framework. Predictability and stability are important to lenders and investors, and this structure offers them more certainty and protections.
Gates Little, President and CEO, altLINE Sobanco
Incur Limited Liability Protection
One of the most significant advantages of operating as a corporation is that it provides limited liability protection to its owners. This means that if the company is sued or incurs debt, the personal assets of the shareholders are generally not at risk.
We can only hold shareholders liable for their investment in the company, which typically comes as the capital they have contributed. Additionally, the corporation itself is a separate legal entity that can enter contracts, incur debt, and be held liable for its actions. This helps to protect shareholders from personal liability and financial loss because of the company’s activities.
Steve Rose, CEO, Money Transfers
Have a Flexible Ownership Structure
A corporation may have an unlimited number of shareholders. Thus, ownership can be divided into different classes of shares with different voting rights. This can make it easier to attract outside investors and provide greater flexibility in terms of ownership and control.
In addition, with a flexible ownership structure, corporations can easily bring in outside investors and issue additional shares to raise capital. This can help the company grow and expand without relying solely on debt financing or internal funds.
The ownership structure of corporations also facilitates an easier transfer of ownership of a company. We can do this either through the sale of stock or through an initial public offering (IPO). Business owners can use this as a convenient exit strategy and a way to monetize their investment in the company.
Jonathan Merry, Founder, Moneyzine
Raise Capital Through Sale of Stock
One advantage of choosing a corporation over an LLC for your business is the ability to raise capital through the sale of stock. Corporations can issue different stocks, such as common stock, preferred stock, and stock options, to raise capital from investors. This can be particularly beneficial for businesses that need to raise large amounts of capital to finance growth or expansion.
By selling shares of stock to investors, corporations can raise funds without taking on debt or diluting ownership among a small group of individuals. Another advantage of a corporation is that it may have greater perceived stability and credibility in the eyes of investors, customers, and vendors, which can help to attract more business opportunities.
However, it’s important to note that corporations are subject to more regulations and formalities than LLCs, and may also face higher taxes and legal fees. Therefore, it’s important to consult with a business lawyer and accountant.
Nick Cotter, Founder, newfoundr