Corporate Finance Tutorials
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- Corporation vs LLC
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- LLC vs Sole Proprietorship
- LLC vs Inc (Corporation)
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LLC vs Inc (Corporation) Differences
So, you have decided to go from sole-proprietorship to something more recognized. Since you’ve been bombarded with so much of information, you’re not able to decide what’s the right thing to do? To go for LLC (Limited Liability Company) or to stick with a corporation.
Well, in this article, we will break down the difference between LLC vs Inc so that you can easily decide what you should do.
The first thing you need to think about is your vision. Do you want to have a full-fledged public company that will serve thousands and thousands of customers? Do you want to issue shares to the public? Do you want to have more owners on board?
Depending on what you want, you should decide.
Let’s say you want more owners on board, then you should go for LLC and not for Inc. However, if your aim is to issue stocks in the near future, LLC won’t fit the bill. You should choose a corporation.
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Ultimately the objective of forming a new entity will determine whether you should go for an LLC or Inc
If the objective doesn’t matter and you want a quick solution, the best bet would be an LLC. Why? Because forming an LLC will require less paperwork. That means you could save more time. Plus, you just need to pay anything between $100 to $800 to file the articles of organizations with the State Secretary. However, LLC has a major demerit. In LLC, the members need to pay self-employment taxes on their salary/profits.
On the other hand, Inc needs a prodigious amount of paperwork. And moreover, once you form an Inc, you need to go through a huge amount of record-keeping as well.
Now, as we can see that there’re many pros and cons of LLC vs Inc, let’s have a look at the head to head differences between LLC vs Inc –
LLC vs Inc (Corporation) Infographics
Here we provide you with the top 8 differences between LLC vs Inc (Corporation)
LLC vs Inc (Corporation) Key Differences
Here’re the key differences between an LLC vs corporation –
- If you’re planning to create a giant company, a corporation can be the right choice for you. And for a small or mid-sized organization, LLC would be the right choice.
- If you want to form an LLC, you need less paperwork. On the other hand, forming a corporation requires a huge amount of paperwork.
- If you form an LLC, you won’t be able to issue shares in near future. If you form a corporation, you would be able to issue shares in near future.
- For LLC, there’s single taxation applicable. For a corporation, on the other hand, double taxation is applicable.
- In the case of an LLC, the entire ownership is owned by the members of the LLC. In the case of a corporation, the ownership lies with the shareholders, but everything is managed by the management.
LLC vs Corporation Head to Head Differences
Here are the head to head differences between an LLC vs Corporation –
|Basis for Comparison between LLC vs Corporation||LLC||Inc|
|Perfect for||LLC is perfect for small & medium-sized businesses that have fewer shareholders.||Inc is perfect for large organizations (or organizations that plan to go big)|
|Ownership||Members own all the ownership of an LLC.||Shareholders own the corporation altogether.|
|Taxation||Single taxation is applied to LLC. Whatever profits/losses are made by the LLC are directly passed on to the members.||Double taxation is applied in the case of a corporation. Corporate taxation is applied on corporate income and then personal taxation is applied on personal income (dividends paid to shareholders).|
|Separate entity||LLC and members are considered as separate entities, but profits/salaries paid to members are taxable.||In the case of a corporation, the shareholders and the corporation are completely separate entity.|
|Meetings||In the case of LLC, there’s no legal requirement of meetings.||In the case of a corporation, regular meetings are being conducted.|
|Paperwork||To form an LLC, you need less paperwork.||To form a corporation, you need a prodigious amount of paperwork.|
|Issuing shares||An LLC can’t issue shares.||A corporation can issue shares in near future.|
|Perpetuity||Death or withdrawal of a member or two affects an LLC.||Death or withdrawal of a shareholder or two doesn’t affect a corporation.|
LLC vs Inc (Corporation) – Final Thoughts
It is important to understand the difference between an LLC vs corporation. Understanding the differences will help you choose the right option. If you want to scale your business to a giant organization, corporation would be the right choice. But if you want to form a quick, limited liability organization without much paperwork, then an LLC would be the perfect bet. You would also earn better flexibility in taxation in the case of an LLC.
This has a been a guide to the top differences between LLC vs Inc. Here we also discuss the LLC vs Inc (Corporation) differences with infographics, and comparison table. You may also have a look at the following articles for gaining further knowledge –
- Annuity vs Pension | Top Differences
- Corporation vs LLC Differences
- Differences Between Annuity vs Lump Sum
- Differences Between Dividends and Growth
- What is the S Corporation (S Corp)?
- Differences Between Annuity vs Perpetuity
- What are the Rights Issue Shares?
- Revenue vs Earnings
- Differences Between Stocks vs Shares (Stockholder vs Shareholder)
- Differences Between Options vs Warrants