One of the biggest differences between corporations and LLCs is the way they are taxed. To choose the entity that best fits your business, you need to consider the main differences between the two entities, including taxation, management, annual maintenance requirements, and differences in ownership. Is it better to have an LLC or a corporation?įrom liability protection to tax savings, the benefits of incorporating your business are undeniable. In fact, an LLC is a unique hybrid entity that combines the simplicity of a sole proprietorship with the liability protections offered by starting a corporation. More formality requirements than for a limited liability company which offers similar advantages.Īn LLC is not a type of corporation. More expensive to create than partnership or sole proprietorship, but offers potential tax savings. Can get tax exempt status with the IRS.Īnnual reports, minutes, meetings are required to maintain nonprofit / tax exempt status.Īn S Corporation is a tax status, so any existing liability protections from your base entity carry over. Stock may be sold to raise capital.Ī corporation formed for a charitable, educational, religious, literary, or scientific purpose.Ĭontributions to charitable corporation are tax deductible.
Meetings are required to maintain corporate status. Separate taxable entity, corporate profits among owners and corporation.
Owners / shareholders have limited personal liability for business related debts. The easiest entity to maintain with the least amount of formal annual requirements.
IRS rules allow LLCs to choose between being taxed as partnership or corporation. Combines limited liability protection with a pass-through tax structure.
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