What are the Differences Between an LLC and a Corp?
And one of the initial questions you’ll certainly need to ask is, “What is an LLC, and how does it compare to a Corp?” Then naturally, your next question will be, “So…which one should I set up?”
An LLC, or limited liability company, is a legal business entity you form to protect your personal assets from liability. It will also establish how your business income is treated come tax time.
What is an LLC?
The other most common option is a corporation (aka a Corp or Inc.). Corporations are another business entity that also provides liability protection. But, they are set up a little differently from an LLC.
What is a Corporation?
These two business entity options have some similarities and, of course, differences. Choosing between the two will depend on your business type and needs and your own liability and tax planning goals.
What are the Differences Between an LLC and a Corp?
An LLC is typically either owned by one person or a small group of co-founders. But technically, an LLC doesn’t have “owners”; it has “members.” Meanwhile, an Inc. effectively belongs to the people who hold shares in it, and the company management is accountable to those shareholders.
Ownership
One reason why making your business an LLC is worthwhile is because, as the name “limited liability company” suggests, it creates a barrier between the business activity and the member’s personal assets from a legal standpoint. Any debts it accrues will not fall to you to repay should it encounter legal issues, for example. (Unless, of course, the debts are personally guaranteed.)
Liability Protection
Generally speaking, LLCs indeed have less paperwork, particularly because it doesn’t have to hold “annual meetings” of the directors and take meeting minutes. It also does not have to issue “stock certificates” to its members.
Paperwork
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