Incorporate vs. LLC

Choosing a Structure for Your Business

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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.

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

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.

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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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