Frequently Asked Questions

Is it “easier” and cheaper to form and maintain an LLC than a corporation?

Generally, this is not an accurate statement, though there are some specific aspects of running an LLC that you may find easier. For example, because there are very few governance formalities that apply to an LLC (e.g., obtaining written consents for company actions) other than what is laid out in the LLC’s Operating Agreement, there are fewer opportunities to make errors regarding those formalities, and perhaps less need to involve legal counsel when the company takes actions that significantly impact the business. The contractual nature of the Operating Agreement also allows for far more flexibility in how you structure the governance of your company.

However, actions that are straightforward for corporations (like creating an employee stock plan) tend to be much more complicated for LLCs because there are usually no “off-the-shelf” solutions – documents need to be custom-drafted and tailored to your LLC, so you ultimately end up spending more time and money on legal costs if you need to go beyond the matters covered by your LLC’s initial Operating Agreement. You will probably also need to spend more time and money on obtaining tax advice, as the tax treatment of LLCs creates more opportunities to unintentionally impact your personal income taxes.