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I Prefer LLCs

A limited liability company (LLC) should be the default choice when you are thinking about starting a business, entering a joint venture, or creating an entity to own real estate, intellectual property, or other hard assets.

Here are some reasons why I prefer LLCs:

  • Versatility - you can use LLCs for lots of purposes, such as owning real estate, operating a service business, holding intellectual property, or entering into a joint venture.

  • Management style flexibility - you can decide whether it will be managed like a partnership (the owners make all decisions) or a corporation (e.g., having a board and officers).

  • No limitations on owners - S corporations limit who can own them (shareholders must be individuals, US citizens, and limited to 100 or fewer). Anyone or any entity can own an LLC - non-US citizens, other businesses, a trust, etc.

  • Multiple levels of ownership - S corporations can only have one class of ownership. LLCs don't have that restriction.

  • Taxation choice - you get to decide how you want to be taxed - like a sole proprietorship (if only 1 owner), like a partnership (if 2 or more owners), like an S corporation, or like a C corporation. Talk to your tax advisor about which choice might be best for you.

  • Few formalities - Boards aren't required, annual meetings aren't required, annual filings with the state aren't required (although paying an annual fee to the state is required).

  • Confidentiality - Very little information needs to go in the public record (at least in Virginia). All you need to file in Virginia is the name of your LLC, its principal office address, the name of its registered agent, and the registered agent's address. If you don't use your name in the name of the LLC, don't use your home address as the principal office address of the LLC, and don't name yourself as the LLC's registered agent, it becomes very difficult for someone to determine who owns the LLC (unless you put that info somewhere else, like on LinkedIn or your company's website).

You need a pretty good reason for not using an LLC.


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