While limited liability companies are the newest form of business entity, new figures shows they are also the most popular.
A recent report in the Fordham Journal of Corporate and Financial Law found that from 2004 to 2007, LLCs formed at twice the rate of traditional C corporations.
In several states, the ratio was even higher. Delaware and Colorado saw three times as many new LLCs as corporations, while Connecticut saw a ratio of more than 11-to-1. By 2007, entrepreneurs in 46 states formed LLCs more than corporations. Only in California, Florida, Illinois, and New York were corporations a more popular business entity.
The LLC was also much more popular than any other business entity type. An entrepreneur was six times more likely to form an LLC than a limited partnership, which researchers said “should be enough to relegate the LP to the dustbin of history.”
One of the main advantages of forming an LLC is that it gives those starting the company additional flexibility compared with a limited partnership. Techrepublic.com says that in a partnership, only the general partner can participate in the management of the company.
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