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What entity should I form?

A Limited Liability Company (LLC) is the most popular entity in Delaware. Eight out of ten entity filings at IncNow are for LLCs.

When initially drafted, members have the power to craft their own LLC operating agreements. An LLC operating agreement is flexible for business needs and adaptable to any business application. The LLC also has fewer business formalities than any other business entity. The LLC is very easy to set up and operate. The LLC provides all the protection of a corporation and arguably more because it can keep creditors of members from becoming owners. The LLC also limits the right of creditors to a charging order remedy, and not a liquidation or sale of a business interest. A creditor can only become a passive lien holder, not an owner with voting rights.

An LLC will be taxed as a partnership/sole proprietorship or the LLC can make a federal tax election to be taxed as an S-Corporation or C-Corporation with the IRS. This “3-way” tax flexibility is not available to a corporation and makes the LLC unique and desirable. That is called the “check the box” tax election.

For simplicity, flexibility, protection and tax advantages, most people choose an LLC.

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