A Limited Liability Company (LLC) has the freedom to distribute its ownership stake to its members without regard to a member’s financial contribution to the LLC. Let’s use the example where a member of the LLC may not have invested as much capital as another member. An LLC’s operating agreement could specify that all members receive an equal share of the profits anyway. This creates additional flexibility when establishing the ownership of the business.
An LLC can also be owned by foreign individuals, other corporations, or any kind of trust. This may make it the right choice for businesses in certain circumstances where these factors are important.
An LLC’s operating agreement also outlines the details about how membership interest can be transferred between its members, if at all, and what happens when a member leaves the LLC. By default, if not defined in the operating agreement, when a member leaves the LLC it must be dissolved.
A corporation can issue shares of stock and sell percentages of the business to its owners, which are called shareholders. These shareholders can transfer shares, purchasing more stock to own a larger percentage of the company, or selling off stock to own less. If your business is one that wants to attract outside investors, a corporation may be the best entity for it. A corporation also exists in perpetuity separate from the owners, meaning that a corporation remains in existence even when an owner leaves or divests from the company.