LLC vs Corporation
A detailed comparison to help you choose the right option.
Limited Liability Company (LLC)
A flexible business structure that provides liability protection with pass-through taxation and fewer formalities.
Advantages
- Pass-through taxation (no double tax)
- Flexible management structure
- Fewer compliance requirements
- Asset protection for members
Disadvantages
- Self-employment taxes on profits
- Limited ability to raise capital
- Varies by state
- May not be ideal for public markets
Corporation (C-Corp / S-Corp)
A formal business entity with defined ownership through shares, strict governance requirements, and potential for raising capital.
Advantages
- Easier to raise capital through stock
- Perpetual existence
- S-Corp avoids double taxation
- Preferred by investors/VCs
Disadvantages
- Double taxation (C-Corp)
- Strict governance requirements
- More expensive to form and maintain
- Complex recordkeeping
Key Differences
- 1Taxation: LLCs have pass-through; C-Corps face double taxation; S-Corps have pass-through with restrictions
- 2Ownership: Corporations use shares; LLCs use membership interests
- 3Governance: Corporations require boards and officers; LLCs are more flexible
- 4Investment: Corporations are preferred by venture capital and public markets
- 5Formalities: Corporations require annual meetings, minutes, and resolutions
Which Should You Choose?
Choose an LLC for small businesses, real estate holdings, or consulting practices where flexibility and simplicity matter. Choose a corporation if you plan to seek venture capital, go public, or need a well-defined governance structure. An S-Corp can provide tax advantages for profitable small businesses with limited shareholders.
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