Incorporate vs. LLC

Choosing a Structure for Your Business

Incorporate or form an LLC? It is a common question many small business owners face when they hope to take their enterprise to the next level. Small business owners should consider the advantages of both a corporation and a limited liability company (LLC) and which one is better for their company's short-term and long-term goals when forming a new company.

Weighing the options and comparing incorporation vs LLC is important when selecting the right structure to help maximize the chances for success. Though corporations and LLCs can both help protect personal assets from business debts and any potential lawsuits or judgments made against your business entity, an incorporated business and an LLC offer a difference in benefits.

What Does LLC Mean?

LLC stands for Limited Liability Company. It's a type of business structure with several tax advantages and personal liability protections, including the figurative protective wall forming an LLC affords business owners, which separates your personal assets from your company's liabilities.

In contrast, a corporation is a business type that has a specific structure, which includes shareholders, directors, and officers. Corporations have the ability to issue shares of stock to attract investors.

Here are just a few of the ways in which the structures differ from one another.

Advantages of an LLC Advantages of a Corporation
  • no limit on the number of owners
  • profit and loss are passed through to the owners' individual tax returns
  • no annual meeting or minute book requirements
  • may issue shares of stock to attract investors
  • corporate income splitting may help lower overall tax liability
Disadvantages of an LLC Disadvantages of a Corporation
  • cannot engage in corporate income splitting to lower tax liability
  • cannot issue stock
  • double taxation of corporate profits and shareholder dividends
  • must hold annual meetings and record minutes
  • s corporations have restrictions on number of owners

How to Become an LLC?

The Company Corporation can help show you how to register an LLC. The Company Corporation can walk you through the process either online or by telephone.

How to Become a Corporation?

The Company Corporation will help you form your corporation in any state you choose. We'll guide you through the Articles of Incorporation and file them with the state on your behalf.

Once you're all set and incorporated, your corporation must follow certain requirements: adopt bylaws, hold directors' and shareholders' meetings, and issue stock to owners. We will help make sure all of your requirements are met and maintained.

Choosing to incorporate or form an LLC is an important decision. Take your time making this decision on forming your ideal business structure, and if necessary, consult with an attorney.

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 of its choosing. For more information on choosing a state that best suits your business's needs, please consult our State Guides page to better inform your decision.

Read More About Legal Business Structures

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

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