Question

A Limited Liability Company has limited liability and at the same time is not subject to double taxation. Therefore, it has the advantage of both a partnership and a corporation. Then why would people still set up their firms as corporation?

Answer 1

People would set up their firms as Corporations because Corporations are the best vehicle for eventual public companies. Corporations are ideal vehicles for raising the investment capital. A corporation which is seeking to raise capital need only sell shares of its stock. The purchasing shareholders pay cash or property for their stock and then they become part owners in the corporation. Of course, the sale of corporate stock is heavily regulated by the U.S. Securities and Exchange Commission and by state securities laws but still they are the ideal ones for raising capital from the public. Moreover, Corporations have a reliable body of legal precedent to guide owners and managers which a Limited Liability Company doesn't have.