There are three main reasons:
- LLCs have a much simpler legal structure than corporations, and this structure is more practical for most small businesses than the corporate legal structure.
- Both corporations and LLCs provide statutory limited liability. However, multi-member LLCs provide certain additional and important statutory business asset protections—called charging order protections and pick-your-partner provisions—that corporations don’t provide.
- The best federal tax regimen for individuals who own single-owner businesses is taxation as individuals, and for multi-owner businesses it is Subchapter K. Under the relevant federal tax rules, LLCs that are owned by one individual can be taxed as individuals and multi-member LLCs can be taxed as partnerships. This federal tax treatment is unavailable to owners of corporations.