Corporation or LLC: Which is Better? ANNA So there it is. Our partnerhsip agreement. I had to put it away in the safe. T

[answerhappygod]

Corporation or LLC: Which is Better?
ANNA So there it is. Our partnerhsip agreement. I had
to put it away in the safe. The cleaning crew kept trying to
throw it away. We're going to have to come up with something
else.
CALEB Okay. This ought to work. Look, it's even
college-ruled.
ANNA No. I mean, we have to come up with a new
agreement. It's not going to work for us to keep being a
partnership. We need to think about incorporating.
CALEB Incorporating?
ANNA Right now, if something happens with our software, you
and I could be totally liable. Also, as far as I know, we
can't transfer ownership. If one of us leaves, the whole thing
just dissolves.
CALEB I was just kidding about going back to grad
school.
ANNA Even so.
CALEB Well...but we don't need to incorporate. We could
form our own limited liability company.
CALEB I've heard that an LLC does a lot of the same things
as a corporation. Maybe we could make a little more
money!
CALEB We should talk to a tax accountant, corporation is
taxed twice. An LLC isn't. That means we only have to pay
taxes once.
ANNA You may be right. But if we wanted to maximize our
short term benefits, we wouldn't have quit our day
jobs. There are reasons we need a corporation, especially
if we plan on being here in the long run.
CALEB How?
ANNA Well, for one thing, the corporate tax rate is
lower than the income tax rate. That makes it easier to
reinvest in the business, to help it grow.
CALEB But we don't need to reinvest profits as much. We've
got that loan from my dad.
ANNA We also need to start getting some venture capital. It
might be easier to get that kind of backing if we were a
corporation.
CALEB Isn't that getting a bit ahead of ourselves?
ANNA No. People don't know they need us, Caleb. They don't
know they need your software. So we're going to need to
publicize it. We'll need the benefits of
incorporation.
CALEB But we've have enough loan money for publicity. Look.
An LLC is just better for me. With an LLC, if we decide to
dissolve this thing, my software can revert back to me
automatically according to the agreement.
ANNA Uhh...I thought you said you weren't going to grad
school.
CALEB I'm not, I'm just...want to be smart, for once. Look,
I wrote this software and I want to keep is as close to me as
possible. Let's take a look at this. We're selling
licenses here, not lawnmowers.
ANNA I know. That's why
CALEB Hey, hear me out. So that means most of our money
will come from royalties. And an LLC is the best for handling
royalties. We don't need stockholders and dividends. We
need income. And an LLC is the best for that.
CALEB And it could be the fastest way to pay off my
dad.
ANNA He's thinking about this defensively, I'm thinking
offensively. He wants to give it the minimum
commitment keep his assets close, maximize the amount of
money he can make upfront. But if we really want to expand our
business opportunities, we need to take advantage of corporate
structuring. And call those venture capital guys
back.
CALEB I'm just trying to make the most of what we
have. And, besides I wrote that software. I want it to
stay as much mine as possible. I respect Anna for wanting to
just go with this, I mean, that's why she's the business
manager of this partnership. But can't we incorporate later,
after we make some money back?
NARRATOR Many factors go into the decision of whether to
form a corporation or a limited liability company. Which
should Anna and Caleb choose?
answer the narrators question within a couple paragraphs or
until answered with reason