Entity type
Dappr is currently offering formation of two entity types, but more are on the way. Those two types are LLCs and C-corporations. Deciding on an entity type is an important decision, so let's dive in.
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Dappr is currently offering formation of two entity types, but more are on the way. Those two types are LLCs and C-corporations. Deciding on an entity type is an important decision, so let's dive in.
Last updated
LLCs (Limited Liability Companies) and Corporations are two common forms of business structures that offer liability protection to their owners, but there are some key differences between them.
Ownership: An LLC has owners, known as members, while a corporation has shareholders.
Management: An LLC is typically run by its members, while a corporation is run by its board of directors and managed by its officers.
Stock: Corporations can issue stocks, whereas LLCs do not issue stocks, but they can issue membership interests.
Formality: LLCs are often considered to be less formal than corporations, with fewer governance requirements.
Liability protection: Both LLCs and corporations provide liability protection to their owners, meaning that the owners' personal assets are protected from the debts and obligations of the business.
An LLC, or a Limited Liability Company, is a type of business structure that combines elements of both a corporation and a partnership. An LLC provides its owners, known as members, with limited liability protection, meaning that the members' personal assets are protected from the debts and obligations of the business.
LLCs also offer flexibility in management and taxation. The management of an LLC can be determined by its members, and it can choose to be taxed as a partnership, S corporation, or C corporation, depending on its specific needs.
LLCs have become a popular form of business structure because they provide liability protection with less formalities and governance requirements compared to corporations, and they offer more flexibility in management and taxation compared to partnerships. However, it's important to note that the specific rules and regulations for LLCs vary from state to state, so it's important to familiarize yourself with the laws in your state.
Dappr will help you stay compliant with those rules and regulations to help you make sure that you're able to benefit from the liability protection offered by LLCs, also called the "corporate veil". For example, Dappr will help you keep accurate business records, make bookkeeping easy without an accountaint, and help you separate your personal and business finances, all of which are important elements in maintaining the corporate veil and make sure that you have liability protection.
Flexibility in management: LLCs are usually managed by their members, providing more flexibility and control over the management of the company.
Pass-through taxation: LLCs can choose to be taxed as a partnership or an S corporation, meaning that the business itself does not pay taxes on its profits, instead, the profits and losses are passed through to the members who report them on their individual tax returns.
Less formalities: LLCs have fewer formalities and less stringent governance requirements compared to corporations.
Liability protection: Like corporations, LLCs provide liability protection to their owners, meaning that the owners' personal assets are protected from the debts and obligations of the business.
Limited stock options: Unlike corporations, LLCs cannot issue stocks, which can limit the options for raising capital.
Restrictions on ownership: LLCs may have restrictions on the types of individuals or entities that can own membership interests.
Self-employment taxes: The profits of an LLC are subject to self-employment taxes, which can be higher than the taxes paid by corporations.
LLCs (Limited Liability Companies) are a versatile form of business structure that can be suitable for many types of businesses. Here are some examples of businesses that may be well-suited for an LLC structure:
Small businesses: LLCs are often a good choice for small businesses because they provide liability protection with less formalities and governance requirements compared to corporations.
Solo entrepreneurs: LLCs can be a good choice for solo entrepreneurs who want to protect their personal assets while retaining control over the management of the business.
Real estate holdings: LLCs can be used to hold real estate, providing liability protection for the owners while also allowing for pass-through taxation.
Joint ventures: LLCs can be a good choice for joint ventures between two or more individuals, as they provide a flexible structure for sharing profits and losses.
Service-based businesses: LLCs can be a good choice for service-based businesses, such as consulting, as they provide liability protection for the owners and the ability to pass-through profits and losses to the members.
It's important to note that the best form of business structure for your specific needs will depend on various factors, such as the size and type of your business, the number of owners, and your specific goals.
A corporation is a type of business structure that is separate from its owners, known as shareholders. A corporation is considered a separate legal entity from its owners, meaning that the business can enter into contracts, sue or be sued, own assets, and pay taxes in its own name.
One of the main benefits of a corporation is that it provides limited liability protection to its shareholders, meaning that the shareholders' personal assets are protected from the debts and obligations of the business. Additionally, corporations have the ability to issue stocks, which can provide more options for raising capital.
Corporations are also subject to more formalities and governance requirements compared to other forms of business structures, such as holding regular meetings and keeping detailed records. They are also taxed as separate entities, and any profits that are distributed to shareholders as dividends are taxed again at the individual level, which can result in double taxation of the company's profits.
In summary, corporations are a popular form of business structure for larger companies that want to provide limited liability protection to their owners and have the ability to raise capital through the issuance of stocks. However, it's important to consider the potential disadvantages, such as increased formalities and the potential for double taxation, when deciding whether a corporation is the right structure for your business.
Pros of a corporation:
Raising capital: Corporations have the ability to issue stocks, which can provide more options for raising capital.
Transferable ownership: Stocks in a corporation can be easily transferred, making it easier to bring in new owners or to transfer ownership to others.
Limited liability protection: Like LLCs, corporations provide limited liability protection to their owners, meaning that the owners' personal assets are protected from the debts and obligations of the business.
Credibility: The corporate form is widely recognized and can give the business a professional image and credibility in the eyes of customers, suppliers, and investors.
Cons of a corporation:
Double taxation: Corporations are taxed as separate entities, and any profits that are distributed to shareholders as dividends are taxed again at the individual level. This can result in double taxation of the company's profits.
Formalities and governance requirements: Corporations have more formalities and governance requirements, such as holding regular meetings and keeping detailed records. The good news is that Dappr takes care of a lot of this for you, and helps you stay compliant.
Cost: Setting up and maintaining a corporation can be more expensive than setting up and maintaining an LLC, due to the additional legal and accounting requirements.
A corporation is a type of business structure that can be a good choice for a variety of businesses, but it is typically better suited for larger and more established businesses, or startups with ambitions of high growth and customer volume, that have the following characteristics:
Raising capital: Corporations have the ability to issue stocks, which can provide more options for raising capital, especially for businesses that want to expand and grow.
Transferable ownership: Stocks in a corporation can be easily transferred, making it easier to bring in new owners or to transfer ownership to others. This can be particularly useful for businesses that are planning for succession or want to attract outside investment.
Multiple shareholders: Corporations can have multiple shareholders, making it easier for businesses with multiple owners to manage ownership and control.
Professional image: The corporate form is widely recognized and can give the business a professional image and credibility in the eyes of customers, suppliers, and investors.
It's important to keep in mind that corporations have more formalities and governance requirements compared to other forms of business structures, such as holding regular meetings and keeping detailed records, and they are also subject to double taxation. Dappr will help you stay on top of the compliance related requirements. For example, with Dappr's business records features, you can rest assured that your cap table (list of owners) is always up to date. Dappr will also file some state paperwork for you, so you don't have to worry about those formalities.
Dappr will help you stay compliant with rules and regulations to help you make sure that you're able to benefit from the liability protection offered by corporations, also called the "corporate veil". For example, Dappr will help you keep accurate business records, make bookkeeping easy without an accountaint, and help you separate your personal and business finances, all of which are important elements in maintaining the corporate veil and make sure that you have liability protection.
Dappr is an all-in-one platform for starting and running your business. With your Dappr subscription, you will be able to form a business with the entity type of your choice, set up a bank account, stay on top of your finances with bookkeeping, hire an accountant, keep accurate business records, receive investments, issue ownership/shares, issue invoices and quotes, take payments in-store using our POS system, communicate with your team, hire employees, run payroll. You get the point: The list goes on.
To start a business with Dappr, simply visit our website at Dappr.com and click the "Get started" button. We will guide you through the entire process and keep you updated as your business gets registered with state and federal authorities.