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)!

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?

They are an entirely separate entity from their owners, who hold ownership through shares (or stock) of the company.

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.”

Ownership

Meanwhile, an Inc. effectively belongs to the people who hold shares in it, and the company management is accountable to those shareholders. Because a corporation is very distinct from its shareholders, a shareholder can sell their stock to someone else, and the company can continue doing business fairly seamlessly.

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.

Liability Protection

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