Why an LLC is preferable to a Corporation for Joint Ventures

If a joint venture is structured as a separate jointly owned entity, there are several reasons to structure it as an LLC as opposed to a corporation.

LLCs pass their taxable income through to their owners, which effectively reduces the maximum federal tax rate on the venture’s income from 41.8% to 35%. Furthermore, if a joint venture is created with hopes of sale or IPO, an LLC allows for greater after-tax proceeds of a sale or IPO. A joint venture LLC can also be beneficial if the venture is not successful, because it allows the business to split up tax-free. A tax-free split is difficult for a joint venture corporation.

See Lowell Yoder, The Limited Liability Company (LLC) is the Entity of Choice for a Joint Venture, Forbes, Apr. 17, 2012.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.