LLC vs. Corporation: Which is right for you?

Someone asked me today if I would help them set up an Arizona Limited Liability Corporation. The problem is, there is no such animal. In Arizona, your options are to incorporate – either for profit or as a non-profit – or form an LLC. The “C” in LLC stands for Company and not Corporation. So, you’d be forming an Arizona Limited Liability Company.

It’s common for people to question which vehicle is right for them. Although LLCs are a relatively new type of business structure and people may be more familiar with corporations, LLCs are growing in popularity. The primary advantage of an LLC is that it allows its members the personal liability protection of a corporation, but without all of the corporate formalities. Annual statistics shows that Arizona businesses are nearly three times more likely to choose an LLC over a corporation because the Arizona LLC is cheaper to form, easier to operate, has flexible tax options, and far fewer formalities than Arizona corporations.

Case in point; for corporations the Arizona Corporation Commission (ACC) requires an annual shareholder meeting, an annual meeting of the board of directors, documented minutes of the shareholder meetings, an annual report and an annual fee. The ACC requirements for LLCs...zip. No meetings, reports, or fees.

Add to this the ability to form an LLC that gets taxed like a S Corporation and you can easily start to see why an LLC is the preferred method of doing business and holding properties for Arizona small business owners, real estate agents and real estate investors.

As of July 5, 2009 there was a combined total of 352,394 domestic LLCs and PLLCs vs. 126,546 domestic corporations formed year-to-date in Arizona. Statistics pulled from http://starpas.azcc.gov/scripts/cgiip.exe/WService=wsbroker1/connect.p?app=statistics.p.