1. Both are separate legal entities that are created by a state filing.
2. Both offer the same limited liability protection - the owners are
typically not personally responsible for the debts and liabilities of the
business.
3. Both entities have very few ownership restrictions. The owners are not
required to be US residents and the number of owners is without limitation. The
owners are not required to be individuals as with an S corporation. They can be
other corporations, LLCs or partnerships, as well as certain trusts.
4. The ownership, which is stock with corporations or membership interest
with LLCs, can be divided into numerous classes.
1. Taxation. The LLC is a pass-through tax entity. This means
that the income or loss generated by the business is reflected on the personal
income tax return of the owners. „h A C corporation is a separately taxable
entity. The profits and loses are taxed directly to the corporation. This can
lead to double taxation on dividends that are paid out of corporate profits to
the owners.
2. Formalities. A corporation requires that certain formalities be
followed. The corporation must hold annual meetings of shareholders and
directors each year, and meeting minutes must be kept with the corporationˇ¦s
records. „h LLCs are not required to hold such meetings; however, it is a good
idea to document major decisions of the company and hold regular meetings of
members.
3. Transferring stock in a corporation it typically easier than the
transfer of ownership with an LLC. Typically, a shareholder of a corporation
is not required to get approval of the other shareholders before selling stock.
Whereas with an LLC, the usual rule is that the owners must obtain approval of
the other owners before ownership can be sold.
4. The management of an LLC can be by members, in which case the
management is much like that of a partnership. If the management of an LLC is by
managers, then the management structure closely resembles a corporation.
Article provided by BizFilings,
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