What are some basic advantages of starting a LLC verses incorporating?
The key advantage is from an income tax perspective. LLCs are generally taxed for income tax purposes as a partnership. This means that the income flows through to the owners and is taxed directly to them without a corporate level tax. The reality is a good bit more complex. An LLC can choose (in tax jargon "elect") to be taxed as any type of entity, including a corporation! Most LLCs, however, are taxed as either a partnership (when there are two or more owners, called members) or not taxed at all (in tax jargon, a "disregarded entity") if they have but one member.
Corporations come in several "flavors". There are S corporations which are taxed as flow throughs similar to LLCs and C corporations which pay corporate level tax and then can distribute dividends to their owners (shareholders) which are taxed again to them ("double taxation"). But, as with most tax rules, there are lots of compications (need to keep all the accountants employed). S corporations are much more complex than LLCs. There are limits on how many people can own an S corporation. Many types of trusts cannot be shareholders. Entity level debt is not included in tax basis.
Just in case that wasn't complex enough, state rules can differ so that in some states LLCs are taxed like corporations so it might actually be better to be organized as a partnership in those states.
My book "Starting Your Own Limited Liability Company" published by John Wiley & Sons, Inc. will give you a good comparison of LLCs and many different types of entities. The bottom line in most cases is the LLC is the best choice, but there are important exceptions and you probably should consult both a corporate attorney and CPA to get the best answer for you.
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