LLC Vs. Company

By Chris Blank

By definition, every limited liability company, or LLC, is a company. The reverse is not necessarily true. A limited liability company is one of several possible legal structures for a business, with specific rules that apply to its formation and its day-to-day operations. The word “company,” on the other hand, is much more general.

"Company" and "Business"

The Free Legal Dictionary defines the word "company" as "any formal business entity for profit," that is, any formal organization designed to make money. The Free Legal Dictionary defines the word "business" as "any activity or enterprise entered into for profit." This definition includes companies, but also includes street vendors or even one-time commercial transactions. The IRS draws a distinction between "business" or “company” and "hobby." Businesses and companies are intended to make to make a profit, even if they sometimes lose money. The IRS does not view hobbies as profit-oriented, even if you occasionally make money from them.

Legal Liability Company

Many people refer to LLCs as "legal liability corporations," according to the Free Legal Dictionary. This is incorrect. Most LLCs are not legally designated as corporations. LLCs are designed to allow their members to shield their personal assets from liability related to the business of the company. Members of an LLC may be individuals, corporations or even other LLCs. Profits from an LLC pass through the company to individual members, who pay federal income tax, including self-employment tax, according to Bankrate.com

Ready to start your LLC? Start an LLC Online Now

Company vs. Corporation

By definition, every corporation is business and a company. This includes sole proprietorships, partnerships, LLCs and corporations. However, only corporations must legally include a designation such as "Incorporated" or "Corporation" as part of their names. A corporation is a complex legal and financial structure that establishes the company a a separate entity for legal and tax purposes. A corporation may sue and be sued and must pay corporate income taxes. The term "double taxation" refers to the fact that profits of a corporation are subject to corporate income tax, while individual stockholders must also pay taxes on dividend income they receive from the company, according to Business.gov.

LLC vs. Corporation

LLCs differ from corporations in that they do not pay corporate income tax, issue stock or have a board of directors. Some LLCs obtain status as an S corporation from the IRS, which allows their members to escape paying self-employment tax without imposing the requirements of issuing stock or paying corporate income taxes. S corporation status also imposes stringent size and structure limitations on the LLC, according to Business.gov.

Ready to start your LLC? Start an LLC Online Now
What Are the Benefits of a S Corp Vs. an LLC?
 

References

Resources

Related articles

What Are Two Main Advantages That a Corporation Has Over a Proprietorship and a Partnership?

C corporations -- corporations that have not elected to be taxed under Subchapter S of the Internal Revenue Code -- enjoy two main advantages over partnerships and sole proprietorships: limited liability and corporate taxation. Limited liability is the main reason that most businesses choose to incorporate. However, the IRS treats corporations differently from partnerships and sole proprietorships for the purposes of both income tax and self-employment tax, often resulting in a net tax savings for shareholders.

How Much Should I Pay Myself From My Corporation?

An owner's decision regarding how much salary to take from a business is generally a private management decision for closely held corporations — corporations where half of the shares are held by five or fewer shareholders — that are not publicly traded. However, the decision is affected by potential tax consequences.

Difference Between a Logo & Trademark

Trademarks include company names, logos, slogans and designs used to identify and distinguish a company's goods in its business trade. The physical mark can be a word, sign, symbol or design that identifies the trademark owner. A trademark must be a unique identifying mark, specifically associated with the goods or services that a company offers in commercial trade. One type of trademark includes the company logo. A logo can qualify as a trademark -- if it meets the minimum requirements. To qualify as a trademark, a logo must be a unique mark used to identify and distinguish the company's goods or services offered in the marketplace. Strong logos often become easily recognizable trademarks throughout society.

LLCs, Corporations, Patents, Attorney Help

Related articles

Can Non Profit Organizations Have Paid Employees?

State laws impose tight restrictions against nonprofit corporations' distributing profits to shareholders. Despite ...

How Many Fundraisers Can a Nonprofit Hold in a Year?

In general, there is no specific legal limit on how many fundraisers that a nonprofit can hold in a year. However, ...

C Corp Salary Rules

A C corporation is a type of business organization that is a separate legal entity from its owners, or shareholders. ...

The Disadvantages of Corporate Governance

Corporate governance is one of the law's most intensely regulated fields. This is because corporations are privately ...

Browse by category
Ready to Begin? GET STARTED