LLC vs Corporation
- The main difference between an LLC and a corporation is the ownership structure.
- LLCs provide liability protection for business owners while corporations are owned by shareholders.
Taxation Options
- LLC can choose different tax entities including sole proprietorship, partnership, C corporation, or S corporation.
- Corporations have the default tax status of a C corporation but can elect to be taxed as an S corporation.
Choosing Between LLC and Corporation
Ultimately, the choice between an LLC and a Corporation for a small business depends on factors such as the desired level of liability protection, ownership structure preferences, tax considerations, long-term goals, and the specific needs of the business.
A limited liability company (LLC) is a type of business entity that protects its owners from personal liability. It is a hybrid business structure that blends the features of a partnership and corporation. LLCs are registered with the state and provide liability protection for business owners and their personal assets.
A corporation is a separate legal entity from its owners, separate and distinct from the individuals or other legal entities that hold shares of stock in the company. Corporations enjoy much more wide-ranging legal powers than other business types, including the ability to issue stock, hire officers, sue and be sued as a separate entity, and engage in other business activities.
Small business owners often choose to structure as an LLC because it offers more freedom than corporation structures do. But before you make this critical decision, it’s important to know the differences between LLCs and S corps.