What Is the Difference Between a Limited Liability Company & a Corporation?

By Brian Richards

The main feature corporations and limited liability companies have in common is the protection for the owners of the business against personal liability for the company's debts. It is for this reason that business owners often choose a corporate or an LLC entity over a sole proprietorship or partnership structure. Choosing between a corporation or LLC can be more challenging, however, and potential business owners should know the legal differences between the two.


LLCs are much simpler than corporations when it comes to filing requirements. Corporate owners must file an annual report with the secretary of state in the state in which the business is incorporated. LLC owners file a similar but shorter report either every year or every other year, depending on the laws of the state. The exact information required by the form and the specific formalities surrounding the annual or biannual reports also vary based on location. Additionally, corporate owners must schedule meetings and record minutes at least once per year, draft and maintain bylaws, monitor and report stock ownership, and comply with a litany of state-specific laws regarding reporting requirements. LLCs, on the other hand, are never required to hold meetings and have very limited filing requirements, needing only to file articles of organization with the secretary of state at formation.


Corporations are owned by stockholders, who may or may not be executives or employees of the company. Corporations may be either public or private, which describes how the ownership of the company is handled. Ownership in public corporations is traded openly, and these entities tend to have many small owners distributed around the state, country or world. Private corporations tend to be owned by fewer people who each have a larger ownership interest in the corporation. LLCs do not sell stock like corporations do; rather, the ownership is flexible given the needs and desires of the LLC's founders. LLC owners are free to distribute ownership interest to its members in any way, with or without regard to the financial investment any member has made.

Ready to start your LLC? Start an LLC Online Now


Corporations are subject to what is called double taxation, meaning the corporation is taxed once at the moment it earns money and then at a second time when that money is distributed to the shareholders. LLCs, on the other hand, function as pass-through tax entities: the LLC does not pay any taxes on its profits, and these funds "flow through" to the owners who report the money on their own personal income tax returns. This structure benefits LLC owners in a few key ways, one of which is allowing the owners to claim business losses on their own tax returns. This can help to offset personal wealth from other sources, saving LLC owners money.


While the corporation is a very old business entity, the LLC is relatively new. As a result, although corporate laws and requirements are similar from state to state, LLCs receive slightly different treatment in each jurisdiction. This means that an owner of a large multistate LLC may be quickly overwhelmed by the various different requirements he has in each location. For instance, some states do not require an operating agreement, while others do. Of those that require the agreement, some demand that it be in writing while others permit it to be oral.

Ready to start your LLC? Start an LLC Online Now
How Much Should I Pay Myself From My Corporation?


Related articles

Taxes on a C-Corp Liquidation

When a corporation ceases its business operations, all assets owned by the company must be distributed. This process is known as liquidation and is necessary, even in cases when the corporation is being sold or converted into a different business structure. As part of every liquidation, state and federal income, payroll and capital gains taxes must be paid at both the corporate and individual levels.

Difference Between LLC & Inc

A limited liability company, or LLC , is a hybrid business entity that includes some features of corporations. For example, both corporations and LLCs provide their owners protection against the debts of the business. There are some crucial differences, however, that should be considered when choosing the best form for your business.

The Disadvantages of Corporate Governance

Corporate governance is one of the law's most intensely regulated fields. This is because corporations are privately owned but are treated as independent legal entities, rendering their assets vulnerable to a variety of potential abuses. Corporate governance is generally governed by state law, although the federal government has also enacted legislation to curb abuses.

LLCs, Corporations, Patents, Attorney Help LLCs

Related articles

Tax Consequences of Converting a C-Corp to an S-Corp

Corporations are business entities formed under state law that exist separately from their owners. An S corporation is ...

Corporation Law Notes

A corporation is a legal entity that gradually developed into its modern form over hundreds of years. It is designed to ...

What Is a Disadvantage of the Corporate Form of Business Entity?

Compared to other business entities, corporations offer many advantages, such as liability protection and ease of ...

LLC Pass Through Taxation

Corporate entities are frequently subject to double taxation, which means that money earned is taxed at two different ...

Browse by category
Ready to Begin? GET STARTED