Ownership and Structure
The main difference between an LLC and a corporation is ownership structure. An LLC is owned by one or more individuals called "members", while a corporation is owned by shareholders. Both entities provide limited liability protection and allow you to establish business credibility.
Taxation and Management
LLCs are relatively straightforward to maintain and are typically taxed as a partnership, while corporations can have complex management and taxation structures. The differences between LLC vs corporation taxes come with their unique set of costs and benefits.
Many new entrepreneurs are confused when it comes to understanding the difference between legal entities and tax entities. A third consideration in choosing between an LLC and a corporation is taxation.
Here we’ll break down the five key differences between how an LLC and corporation are taxed:
- LLCs can avoid double taxation, but corporations cannot.
- Corporations have the ability to go public, while LLCs do not.
- An LLC taxed as a corporation can treat its shareholders who work for the company as employees.
- LLC tax advantages include simplified tax filing and greater flexibility.
- Both LLCs and corporations can choose the tax structure under which they want to operate.
Legal Implications
Consulting attorneys and CPAs familiar with both entities is crucial to understand the legal and tax implications when deciding between an LLC and a corporation. Understanding the differences between S Corps and LLCs is crucial in choosing the right legal structure for your business.
The Difference Between a C Corporation and an LLC Taxes. While various company forms are legally regarded independent entities from their owners, the C corporation is the only structure that is also taxed separately.