If you’re a new business owner, then you’ve likely investigated whether to form your business as an LLC or as a corporation. Ultimately, you should choose the business type that will best fit your short and long-term goals as a company. Here are some of the main similarities and differences to help you decide between the two.
LLC vs. Corporation – The Similarities
For starters, all states recognize business organizations that are properly set up as either limited liability companies (LLCs) or corporations. Second, both LLCs and corporations limit the liability of the business owners from lawsuits and debts placed against the business itself.
LLC vs. Corporation – The Differences
An LLC is a limited liability company, not a “limited liability corporation”. An LLC doesn’t technically “incorporate”, making that an immediate difference. On top of that, the following are all differences that should be considered:
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Management –
LLCs have a lot more management flexibility than corporations. Corporations have set directors overseeing major decisions while directors oversee day-to-day tasks. LLCs don’t follow this same management structure.
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“Pass Through” Business –
An LLC is considered a “pass-through” structure, meaning that profits and losses from doing business pass directly to the owners of the company to file their personal tax returns. Corporations pay taxes at the business level and are considered separate business entities.
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Business Formation –
A corporation is formed by filing corporate organization forms and designating shareholders with shares. A board of directors is also created. An EIN is also needed, which you can apply for at the IRS-EIN-Tax-ID website. For an LLC, one or more people are designated as owners and file Articles of Organization.
Need Help Getting a Tax ID?
Whether you choose to form a corporation or an LLC, you’ll likely need to apply for a tax id. Contact the IRS EIN Tax ID Filing Service today to help with getting an s corp tax id number, or any other type for that matter.
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