LLC vs. Corporation


What is an LLC? What is a corporation? How exactly do these differ and compare?

An LLC, which stands for limited liability company, is an entity type that provides different options for the business owner. LLC’s protect the business owner, who is often referred to as members, from being personally liable for decisions made by the LLC. This type of business structure protects the owner from the potentials risks of a lawsuit, and also protects the business owner’s personal assets.

Other benefits of an LLC include the flexibility in management. While many businesses have directors who oversee decisions, LLC’s do not have that same formal structure, allowing the management pyramid and style to be up to the owner’s discretion. As far as taxes are involved, LLC’s have pass-through taxation. This means that taxes aren’t paid as a business. Any income and/or loss from your business would be reported on your personal taxes. This type of business structure may need an LLC tax ID number which can be easily obtained through IRS-EIN-Tax-ID’s online application.

A corporation, on the other hand, is an entity type where the business is created as an entity entirely separate from the business owner. However, through this way, it helps protect the owner from losing his/her personal assets. In the aspect of taxes is where a significant difference is between a corporation and an LLC. An LLC is an s-corp, which is to say that it is a pass-through tax entity and uses an s corp tax ID number. A corporation, however, is a c-corp which means this entity pays taxes on their profits, often subjected to double taxation if profits are distributed to shareholders.

There are many benefits to both entity types. Before taking the next steps, such as applying for an EIN number, you can review other entity types or read more about LLC’s and corporations at IRS-EIN-Tax-ID.