What is the difference between an LLC and a Corporation?
The difference between a traditional corporation and an LLC. By law, a corporation is a separate entity that has its own rights and responsibilities. In forming a corporation, potential shareholders offer money and/or property in exchange for stock. Advantages of a corporation include limited liability for stockholders, unlimited life for the business, relative ease in raising capital, simple transfer of ownership through the sale of stock and tax-free benefits to the owner/employees. Disadvantages of a corporation include complexity, limitations on activities by the corporate charter, extensive regulation and record-keeping rules, and double taxation, once on corporate profits and again on dividends. Subchapter S Corporations avoid that last issue. Shareholders include their shares of income, deduction loss, and credit as part of their personal income and are not subject to self-employment tax as in a partnership. Disadvantages include less flexibility in choosing a tax year, less fle
Though both Corporations and LLCs offer limited liability to their owners, only an LLC is taxed as either a Sole Proprietorship or a Partnership (unless the LLC elects to be taxed as a Corporation). This enables the LLC to pass all income and losses through to the LLC owners. An LLC also has an advantage over an S-Corporation (a C-Corporation that makes an S-Election) because an S-Corporation can have only 100 shareholders and those shareholders must be U.S. citizens and cannot be Corporations.
