What Is an LLC? And How Is It Different Than a Corporation?

Most “movers and shakers” need to pick between establishing a corporation (aka Inc.) or a limited liability company (aka LLC). This can be a tough decision, largely because it’s difficult to understand the differences (let alone which might benefit you more)!

What Is an LLC? And How Is It Different Than a Corporation?

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?

What is a corporation?

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.

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?

Ownership

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.”

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.

Liability Protection

One of the common issues discussed when deciding between an Inc. or LLC is the amount of paperwork hassle you have to undertake.

Paperwork

Tax savings used to be the most important deciding factor between an Inc. and an LLC. Oddly, since both can be classified as C corps and S corps for tax purposes, they can be pretty much the same.

Tax Treatment

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