Similarities Between Llc and a Corporation

Similarities between LLC and a corporation:

Incorporation creates separate legal entity as viewed by IRS for taxes and justice (legal) system. Offers some protection of personal assets.

Both avoid "Double Taxation". Profits and loss can be passed through to the personal tax return prepared by the individual. With double taxation the company pays tax and the individual pays tax on the same $.

The difference between LLC and a corporation

1 Asset Allocation

A corporation must allocate the company's profits and losses according to the percentage of stock a shareholder owns. However, owners of an LLC can allocate the company's profits and losses in any way the members of the company want.

2. Continuity and Transferability

A corporation will continue to operate independently of who the business owners and directors of the company are since a corporation has its own separate identity from its owners; however, an LLC may end if an owner dies, retires or decides to sell her portion of the business unless its operating agreement contains provisions for continuing the company. In addition, the owners of an LLC must agree on other members before they can be accepted as owners of the company.

3. Ongoing Requirements

Operating a corporation requires strict record keeping. LLC's are not required to hold annual meetings or keep minutes from the company's meetings. Furthermore, an LLC does not have to create financial statements or elect directors to manage the company's resources.

4. Stock

An LLC does cannot issue stock, whereas a corporation can attract investors by issuing various classes of stock.

5. Taxation

A limited liability is a "pass-through" entity, meaning the company can elect taxation as a sole proprietorship, a corporation or a partnership. Owners of an LLC who elect taxation as a sole proprietorship or partnership are able to pass their share of the LLC's profits or losses directly to their individual or joint tax return. A corporation has a double layer of taxation. Corporations must pay taxes as a business, and owners must report income received from the business on their personal income tax return. An LLC does not have to file taxes with the IRS as a