What are the key differences between a corporation and an LLC?

Structuring your business as a corporation or an LLC will offer many benefits to your business. These two business structures, however, are very different regarding taxation, liability protection, management structure, ownership, and compliance. First, a limited liability company’s owners are called “Members,” whereas corporations are owned by “Shareholders.” LLCs also offer an extremely flexible management structure. LLCs can be managed by its Members or by one or more managers. Conversely, corporations have a much stricter management structure, typically with a board of directors handling management responsibilities and officers handling the day-to-day operations. Therefore, in a corporation, the owners, or Shareholders, are separate from the corporation's business decisions and daily operations, except for approval of major decisions. One of the biggest differences between an LLC and a corporation is how they are taxed. An LLC is taxed as a pass-through entity. This means the LLC’s profits and losses pass through to the individual owners and are reported on their personal tax returns. Therefore, there are no corporate tax returns. By contrast, corporations are taxed as separate taxable entities and are responsible for filing corporate tax returns. Taxation is complicated and it is highly recommended that you get advice from an experienced accountant before choosing which business structure will be the most advantageous to your business.