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Comparing Corporations & LLCs

Choosing a Structure for Your Business

Small business owners should consider the advantages of both a corporation and a Limited Liability Company (LLC) when forming a new company. Selecting the right structure can help you maximize your chances for success. Though corporations and LLCs can both help protect personal assets from business debts, they differ in the following respects:

Advantages of a Corporation
  • May issue shares of stock to attract investors
  • Corporate income splitting may help lower overall tax liability
Advantages of an LLC
  • Has no limit to the number of owners
  • Owners can report profit and loss on their individual tax returns
  • Not required to hold annual meetings or record minutes
Disadvantages of a Corporation

  • Double taxation of corporate profits and shareholder dividends
  • Must hold annual meetings and record minutes
  • S Corporations have restrictions on number of owners
Disadvantages of an LLC

  • Cannot engage in corporate income splitting to lower tax liability
  • Cannot issue stock

Note: LLC owners can elect for the IRS to tax the LLC as a sole proprietorship, partnership, C Corporation, or S Corporation. Owners make this election through the IRS after the company forms with the state.

Read More About Legal Business Structures

Regardless of business structure you choose, The Company Corporation can help you incorporate or form an LLC online, or by phone, in minutes.

Not Sure if Incorporating is Right for You?

Try our Business Startup Wizard to see what other business owners in your industry and state have done, download our Free 10-Step Business Formation Guide, or check out another service.