The Differences Between a Corporation and an LLC
A limited liability company, or “LLC”, is an unincorporated business entity which is a cross between a corporation and a partnership. Like a corporation, an LLC protects its members from personal liability for the debts and obligations of the company. Like a partnership, an LLC is typically formed by the filing of a “certificate of formation” or similar certificate with the Secretary of State and is taxed like a partnership. Also like a partnership, the members of LLCs typically enter into an operating agreement which establishes how the LLC is managed. This agreement controls the management of the company and how the members relate to each other.
Where S Corporations have limits on the number of shareholders who also must be US residents, LLCs have no restrictions in these regards. This makes the LLC a particularly suitable vehicle for non-US residents. An LLC can have more flexibility in management because this is controlled by the Members Agreement not by the Business Corporation Act of the state.
Advantages of a Limited Liability Company (LLC)
- Protects personal assets from business activities
- Can form in all 50 States and Washington DC
- Pass through taxation
- No Limit on the number of owners
- Annual meetings and minute books are not required
Advantages of a Corporation (Inc.)
- Protects personal assets from business activities
- Can form in all 50 states and Washington DC
- Can issue shares of stock
- Preferred by investors and for IPO’s
- Recognized outside of the United States
- Corporate income splitting can help lower tax liability
WHAT STRUCTURE IS RIGHT FOR ME?
Not all businesses are created equal, and your requirements aren’t the same as the business next door. When creating your business plan and strategy, consider some of the differences each structure offers and what suits you best. If you are unsure, please call us at +1-845-398-0900 and speak directly with a Corporate Service Specialist