A standard corporation defaults to a tax structure called a C corporation, and is known for what’s called double taxation, where a business’s net income is taxed initially by a corporate tax, and then taxed again on personal income, after shareholders receive their profits (dividends) and losses. Corporations are more advanced for a business owner to take care of during tax season. LLCs are the simpler and less expensive option in terms of time and paperwork for business owners during tax season. LLCs are pass-through tax entities, where income and losses pass through the business and onto the members to report on their personal income tax return. Corporations have more legal formalities than an LLC, like electing a board of directors, holding shareholder meetings, and maintaining internal records such as meeting minutes and stock issuance.Īn LLC is not a separate taxable entity from its owners.
On the flip side, a corporation will require a high level of maintenance, both on a day-to-day and annual basis. An LLC is the best choice if you have a small to medium-sized business and can only handle a low amount of maintenance. LLCs will need only minimal paperwork, have flexibility when a decision is needed, and have low annual upkeep. One of the biggest selling points for an LLC is the ease of maintenance. Here are the main elements true of all LLCs and corporations to help you begin making your decision: Active Filings – The 3rd Oldest Incorporating Service.
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