LLC vs Corporation

Both LLCs and corporations are business entities created for the purpose of asset and liability protection.

LLCs tend to have more flexibility in management and taxation and usually have less strict requirements for recordkeeping than corporations.

Corporations tend to be more structured than LLCs and offer capabilities better for certain businesses -- for example easy transferring of shares -- at the cost of stricter requirements and more work to upkeep.

LLCs are owned by members, who each own a percentage of the LLC. There are usually restrictions on the transfer of ownership among members that can make any sort of change of ownership extremely difficult for LLCs. The same is not true of corporations.

Corporations operate on a system of shareholders rather than members. A corporation will issue a certain number of shares, then ownership of these shares determines ownership of the company. Shares can be transferred easily between people and because the corporation is not directly tied to any one person and rather to the shares they possess, the corporation is not particularly affected in the case of the loss of a shareholder.

Recordkeeping and Management

The more-intensive recordkeeping requirements for corporations can be an unnecessary hassle depending on the structure of your business. LLCs comparatively have very lax recordkeeping requirements which often make more sense for smaller businesses

Corporations are also required to have a slew of managerial processes in place in order to operate correctly as a corporation. This includes having a board of directors and officers, annual shareholder meetings, annual reports, and much more. Although this structure can be extremely beneficial in keeping a large business transparent and productive it is also a large time and resource commitment.

Tax Benefits

Both corporations and LLCs have multiple tax options depending on size and structure.

Corporations are taxed as S corporations or C corporations depending on the shareholders of the business and the size of the business. Generally S corporations are considered more favorable for taxes, as C corporations pay both corporate income tax on profits as well as having shareholders pay personal income tax (commonly called “double taxation”).

LLC’s can be taxed as a sole proprietorship, partnership, S corporation, or C corporation. Once again the S corporation classification is generally desirable, as sole proprietorship, partnership and C corporation all have expensive tax structures for businesses with significant profits.

What Is an LLC?

An LLC, short for limited liability company, is a type of business entity in the US that offers liability protection to its members. Thanks to the LLC structure, members cannot be found personally liable for any of the debts or liabilities of the company.

LLCs are a relatively easy business entity to form and offer its owners flexibility in management style and minimal administrative pains, among other benefits. One or more members can form an LLC by filing articles of organization with the appropriate state agency.

What Is a Corporation?

A corporation is a type of business entity formed by shareholders in pursuit of a common goal or purpose and is a popular choice for businesses all over the world. Corporations can have one or multiple owners (shareholders) and are considered separate entities, offering ownership limited liability protection. So, while shareholders can enjoy profits from the corporation, they cannot be found personally liable for any of its debts.

Additionally, corporations hold many of the same rights and responsibilities that individuals do, such as entering contracts, paying taxes, borrowing money, hiring employees, and more. Note that a corporation is regulated by the jurisdiction in which it is legally formed.

Also important to know is that there are multiple types of corporations, such as a C-corp, S-corp, and non-profit.

  • C-Corporation: The legal structure of a corporation in which shareholders are considered distinct from the entity and taxed separately, as well.
  • S-Corporation: Similar in nature to C-corps, however, S-corps elect a special tax status with the IRS that avoids double taxation and instead passes the corporation’s income, credits, losses, and deductions onto its shareholders.
  • Non-Profit Corporation: This is a corporation formed with the purpose of serving the public good. Such corporations might include charitable, religious, educational, or other public service purposes.

What Is the Difference Between a Corporation and an LLC?

Now that you have an understanding of these two entity types, we’ll run through some of the key differences between them. Weigh the advantages and disadvantages offered by both corporations and LLCs to get a sense for which entity type would be best suited to match your business goals. This is an important foundational decision for your business, so it’s worthwhile to invest some time into making the right choice early on.


When it comes to corporations and LLCs, how these entities are taxed is one of the most important distinctions to understand. As noted earlier, a corporation is considered a separate legal entity and is taxed as such. For this reason, corporations face what is known as “double taxation.” Because corporations must pay taxes on their income, any profits distributed to shareholders will end up being taxed twice, as the shareholders must also report the dividends on their personal tax return.

Note, however, that S-corporations differ from C-corporations in this regard. S-corporations enjoy what is known as a “pass-through” tax classification, which means that the corporation’s profits avoid taxation on the corporate level and pass through to be taxed at the individual level. Keep in mind that there are specific requirements a corporation must meet in order to elect an S-corporation designation:

  • Your corporation must be domestic.
  • Shareholders must be individuals (not partnerships or corporations).
  • Your corporation cannot exceed 100 shareholders.
  • Your corporation can have only one class of stock.

LLCs, on the other hand, have the default classification of pass-through entities (though also have the option of electing to be taxed as a corporation). As noted, this pass-through classification means that the profits of the LLC are reported on the personal tax returns of the LLC ownership. This can greatly simplify your tax filings when compared to that of the often times complicated corporate tax filing process.


If you’re looking to attract outside investors to your business, there are some important distinctions between corporations and LLCs. For starters, if attracting venture capital funds is important to your goals, know that most investors favor a C-corporation entity structure. Additionally, if you have (or are planning to have) foreign owners, the C-corporation structure is once again favored. Also, note that S-corporations do not allow foreign investors.

When it comes to funding for LLCs, this entity type is typically more attractive to businesses looking for a smaller number of investors, rather than those seeking multiple rounds of financing and issuing varying classes of equity. But if these elements are not important to your business, an LLC can be a great choice that offers asset protection and flexible ownership structuring.

Formal Requirements

Both corporations and LLCs have reporting requirements that must be completed in order to maintain good standing in their state. These reporting requirements differ in some regards between the two entity types and will also vary depending on which state your business was formed, as each has their own regulations.

Corporations are required to hold an annual shareholder meeting in which corporate minutes are taken. Any proposed changes must receive a majority vote by the shareholders in order to move forward. Also, corporations are required to file annual reports with the state.

On the other hand, LLCs have fewer reporting requirements, as they do not have the same formal structuring that corporations have, such as a board of directors, corporate minutes, and annual shareholder meetings. Additionally, certain states don’t require LLCs to file annual reports.

Ownership Structure

Be sure to consider the ownership structure when choosing between a corporation and an LLC. Corporations have the ability to issue shares of stock, which represent a percentage of ownership in the company. This ownership (stock) can be purchased, sold, or transferred, adjusting the shareholder’s level of ownership as a result. Additionally, corporations do not rely on any one owner but rather exist in perpetuity regardless of whether an owner departs or divests.

LLCs enjoy the ability to distribute ownership stake in the company as they see fit and do not need to correspond to the financial contribution of the member. This ownership structure must be outlined in the LLC’s operating agreement and include how membership will be transferred among members or what happens when a member leaves.

Management Structure

Another important difference between corporations and LLCs are their management structures. Corporations have a relatively stricter management structure when compared to that of LLCs. A Board of Directors is elected to handle management responsibilities with the aim of generating profits for shareholders and corporate officers are chosen to manage the company’s day-to-day operations. While shareholders aren’t directly involved in management decisions or day-to-day operations, they hold the ability to elect directors or serve as a director or officer themselves.

LLCs enjoy much more flexibility in their management structure and have the option to be member-managed or manager-managed. A member-managed LLC is where the LLC owners oversee the day-to-day operations of the business. Whereas a manager-managed LLC is when members do not have an active role in the business but rather hire a manager to oversee the daily operations.

Which Is Right for Your Business: Corporation or LLC?

After going through some of these key differences between corporations and LLCs, hopefully you have a better sense of which entity type will best suit your needs and goals. While there aren’t particularly cut and dried guidelines for which entity type is best for each business or industry, you can use the comparison above to determine which factors are most important to your business and what you hope to achieve.


For many the deciding factors when deciding what entity to create and how to classify it will be taxes and upkeep. Although upkeep can be analyzed by the business owner to best fit their personal needs and vision for the business, decisions related to taxes are best made by consulting a tax professional in order to ensure you know how a business will be taxed under each structure and classification.


Topics, that might interest you:

Creative Financing Avenues

Credit unions are member based organizations that you can join for free. Most credit ...

Learn more

Tax Sale Opportunities

Tax sale event may arise. But for you to really take advantage of these situations ...

Learn more

Types of Mortgage Interest Rates

If you are currently thinking about purchasing a new home, you no doubt have ...

Learn more

Avoiding Foreclosure

If you’re behind on your house payments, you may be in danger of foreclosure. But ...

Learn more

Real Estate Short Sales

Short sales by their very nature are not simple, but the more you know the better advantage ...

Learn more

Handling FSBO Properties

FSBO refers to real estate which is listed for sale by the property owner instead of through a...

Learn more

Adjustable Rate Calculator

Many home buyers prefer adjustable-rate mortgages because the initial interest rate is lower than a...

Learn more

Real Estate Development Risks

There are a lot of potential risks involved in property or real estate dealings. People who are ...

Learn more

Property Inspection Tips

If you are a real estate owner, you know that your property is like a living being, and as such...

Learn more

Selling Your Home

So you have decided to sell. In today’s real estate market you need all the help you can get in...

Learn more

Interest Only Mortgage

Why would one consider a “Smart Choice” (interest only) mortgage loan? Why not rent and save the funds?..

Learn more

Holding Company Taxes

A holding company (also referred to as a parent or umbrella company) is a company devised to house and manage..

Learn more

Land Trust Benefits & Disadvantages

If you own property, you’re likely looking for a simple, legally effective way to maintain your privacy and protect..

Learn more

Using a Holding Company for Privacy

A holding company is a company whose primary function is to acquire and manage other companies..

Learn more

Asset Protection and Real Estate Holding Companies

Real estate is as lucrative as it is risky. If you’re thinking about getting into real estate..

Learn more

Example uses of a Real Estate Holding Company

Real estate holding companies are the best way to protect your personal assets from the..

Learn more

LLC vs. Sole-Proprietorship

Limited liability companies (LLCs) are business structures in the United State...

Learn more

What's a Holding Company Subsidiary

A subsidiary company is a company that’s owned and controlled by another...

Learn more

Holding Company Naming Ideas

There are many parts that encompass forming a company and, in many cases...

Learn more

Holding Company Benefits: Advantages & Disadvantages

Although not a common idea when first starting your business, a holding company is something...

Learn more

How to Set Up a Holding Company

Holding companies do not exist to create products or provide services.

Learn more

Wyoming vs New Mexico: Where to Form Your LLC

When forming a business in the United States there are a few options to choose...

Learn more

What is a S-Corp Holding Company?

Holding companies are similar to other businesses, but instead of offering a product or service...

Learn more

Operating Agreements: What are they & What to Include

When forming an LLC there are a variety of different aspects involved in the formation...

Learn more

Holding Company vs Series LLC: What’s the Difference?

Holding companies are business entities that are formed with the intent of owning another entity...

Learn more

Business Bank Account

In everyday life, most people own a bank account to digitally use their money and protect it from theft...

Learn more

How to Obtain Your Employee Identification Number (EIN)

Separate your business and personal funds, preserve your limited liability...

Learn more

What is a Registered Agent?

Whether you choose to form an LLC or corporation, and no matter which state...

Learn more

Corporation vs LLC: What’s the Difference?

Does your business have a larger customer base? Is there an increased...

Learn more

6 Simple Steps to Form an LLC in Your Area

From liability protection to a favorable pass-through tax status...

Learn more

What are the Benefits of Creating an LLC? Is it Worth it?

The way you choose to legally structure your business impacts...

Learn more

LLC vs Corporation

Both LLCs and corporations are business entities...

Learn more

Land Trust vs Living Trust

A Trust is a contract between the person who creates...

Learn more

Equity Stripping

If you aren't a real estate investor, you may not be...

Learn more

Intellectual Property Holding Company

Holding companies separate their assets from operational...

Learn more

Investment Holding Company

Investment holding companies do not sell their own products nor...

Learn more

DBA / Trade Name

When legally forming your business with the state, you’ll choose...

Learn more

Obtain an EIN

If you’re in the early stages of forming your business, you may have...

Learn more

Can an LLC Own Another LLC?

A limited liability company, or LLC as it’s commonly abbreviated, is...

Learn more

Asset Protection vs. Living Trust

When estate planning, it can feel overwhelming trying to figure...

Learn more

Asset Protection Trust

An asset protection trust is a type of trust that offers the...

Learn more

Estate Planning Checklist

Estate planning should be a part of anyone’s long term goals for managing their estate and providing...

Learn more

Different Types of Trusts

It’s not something we like to talk about, but regardless of wealth, age, or amount of assets...

Learn more

Estate Planning Forms and Documents

Proper estate planning can ease the burden left on your family after you die, reduce or eliminate...

Learn more

Durable Power of Attorney

Assigning durable power of attorney can be a crucial step as you begin your estate planning, but...

Learn more

Dynasty Trust

If you’re looking for a trust that can last forever, then you need a Dynasty Trust.

Learn more

Executor Responsibilities

The role of the executor (or executrix) of an estate plan or will is to ensure the deceased...

Learn more

Funding a Revocable Living Trust

From avoiding probate and having ultimate flexibility over their...

Learn more

Choosing a Guardian

Many people choose to write a will, obtain life insurance...

Learn more

Estate Planning

Estate planning is the preparation and management of a person’s estate while they’re still living...

Learn more

Living Will / Advanced Health Care Directive

An advanced healthcare directive (also called a living will) is...

Learn more

Revocable Living Trust Cost

Actually, as wonderful as these benefits are, this estate planning document is not for everyone...

Learn more

Revocable Living Trust Taxes

Revocable Living trusts sounds like a simple process with big benefits...

Learn more

Revocable Living Trust

If you want to protect your loved ones after death, it’s essential to have an estate plan in place...

Learn more

Estate Planning vs Will

Estate planning is a general term for the process of...

Learn more

Family Holding Company

There is a lot to be learned from growing up working in a family business. Here are but 7 lessons you can learn...

Learn more

Family Businesses & Children

There is a lot to consider before getting your older involved in a family business...

Learn more

Family Companies After Divorce

You may believe that getting a divorce will ruin your family business...

Learn more

Protecting Family Businesses

You may believe that getting a divorce will ruin your family business...

Learn more

Selling a Family Business

Once the owner decides that selling the business to other family...

Learn more

Family Business Succession

Family business succession planning can be a challenging process...

Learn more

Family Business Tips

Thinking of starting a new business? Maybe a business with...

Learn more

Anonymous LLCs

Limited liability companies are business structures in the...

Learn more

LLC Asset Protection

LLCs are a business structure where the owners are afforded...

Learn more

LLC Benefits

When you are looking to start a business you have a few...

Learn more

Form an LLC

Limited liability companies are a form of business entity in the...

Learn more

LLC Fees

When forming a business in the United States you have the option...

Learn more

Manager vs. Member Managed LLC

Forming an LLC means you will be provided limited liability...

Learn more

Reinstate LLC

Limited liability companies are business structures in the...

Learn more

LLC Requirements

Limited liability companies exist as a business structure in the...

Learn more

LLC Search

Limited liability companies exist in the United States to...

Learn more

Single Member LLC

Limited liability companies (LLCs) are a business structure in...

Learn more

LLC Taxes

Limited liability companies are business entities in the United...

Learn more

Real Estate Agent Commissions

This year marks my 12th year in real estate sales and my...

Learn more

Manhattan Financial District

Up until a short time ago, there was no housing to speak of in...

Learn more

Miami Luxury Condo

Just because you have the money to make a purchase on any real...

Learn more

Interest Only Mortgages

Why would one consider a “Smart Choice” (interest only) mortgage...

Learn more

Online Property Searches

Here in Southern California many home buyers are going the...

Learn more

Software For Real Estate Investing

Looking for the best real estate analysis software for your real...

Learn more

Real Estate

You don’t have to be a real estate agent to think like one. My...

Learn more