LLC or corporation? : how to choose the right form for your business

Decide whether to form an LLC or a corporation -- the most important decision you'll make for your business

Your company has grown -- now it's time to upgrade your legal structure to something that will protect you and your assets, as well as provide other benefits. In other words, your business is ready to become either a corporation or a limited liability company.

The question is, "Which one?" The answer isn't always clear -- but because your choice will affect the legal and tax status of your business, it's the most important question you'll need to answer.

LLC or Corporation? will help you make the right choice with plain-English explanations of:

the basics of business entities
how each business entity protects you from personal liability
profits, losses and tax treatment
converting from one type of business entity to another
what to do if you conduct business out of state

Making the right choice will affect your bottom line in many ways -- from what you pay in taxes to your ability to seek money from investors. In LLC or Corporation? , you'll find real-world conversion and formation scenarios that show all the options available to you.

This edition has been thoroughly and usefully updated with the latest resources for business owners and contains completely updated information regarding the tax status of small business entities. All forms are now downloadable at nolo.com.

• Your Legal Companion p. 1
• Part 1 
• 1 Business Entity Basics p. 5
• Why Your Choice of Entity Matters p. 7
• Sole Proprietorships p. 8
• General Partnerships p. 12
• Limited Liability Companies (LLCs) p. 16
• Corporations p. 20
• ... And the Runners-Up: Limited Partnerships, S Corporations, and RLLPs p. 28
• 2 Personal Liability Concerns p. 45
• How Your Choice of Business Entity Affects Personal Liability p. 46
• Using Insurance to Limit Liability p. 52
• 3 Forming and Running Your Business p. 59
• Forming and Running a Sole Proprietorship p. 60
• Forming and Running a Partnership p. 64
• Forming and Running a Limited Liability Company p. 67
• Forming and Running a Corporation p. 74
• Resources for Forming an LLC or Corporation p. 78
• 4 Money Issues: Taxes, Profits, Losses, and Investments p. 81
• Taxes p. 82
• Paying Out Profits p. 93
• Start-Up Losses p. 99
• Institutional and Venture Capital p. 100
• Planning for a Public Offering p. 102
• 5 Doing Business Out of State p. 105
• Doing Business Out of State p. 107
• Qualifying to Do Business p. 110
• Paying and Collecting Taxes in Other States p. 122
• Lawsuits in Other States p. 127
• Internet Issues p. 142
• Part 2 
• 6 Converting a Sole Proprietorship to Another Entity p. 153
• Converting a Sole Proprietorship to a Partnership p. 154
• Converting a Sole Proprietorship to an LLC p. 161
• Converting a Sole Proprietorship to a Corporation p. 167
• 7 Converting a Partnership to Another Entity p. 177
• Converting a Partnership to a Sole Proprietorship p. 178
• Converting a Partnership to an LLC p. 182
• Converting a Partnership to a Corporation p. 194
• 8 Converting an LLC to Another Entity p. 205
• Converting an LLC to a Corporation p. 206
• Converting an LLC to a Sole Proprietorship p. 215
• Converting an LLC to a Partnership p. 221
• 9 Converting, Dissolving, and Selling a Corporation p. 225
• Converting a C Corporation to an S Corporation p. 226
• Liquidating and Dissolving a Corporation p. 234
• Selling a Corporation p. 237
• 10 Business Choice and Conversion Scenarios p. 245
• Fast Food Fusion: A Start-Up Business Chooses a Business Form p. 246
• Bill and Barbara Seek Investment From a Relative p. 248
• Soaring Duck Designs Seeks Lower Taxes and a Structured Hierarchy p. 250
• Silikonics Creates an Entity to Attract Outside Investors p. 252
• The Surf Side: From Lunch Counter to LLC to Corporate Franchise p. 253
• Appendix: State Website Information p. 257
• State Business Entity Filing Websites p. 258
• State Tax Office Websites p. 258
• State Securities Office Websites p. 259
• Index p. 261