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

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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.

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What Are the Benefits of a S Corp Vs. an LLC?

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An Employer Identification Number for a business entity is analogous to a Social Security number for an individual. The IRS uses EINs to identify businesses and track their financial data. It's relatively easy to find a company's EIN if the company is a non-profit organization or if the company's stock is publicly traded.

An LLC Vs. Sole Proprietorship

Sole proprietorships are the most common form chosen for new businesses, according to Business.gov. This is especially true for consultants, freelance journalists and other independent workers, Bankrate.com states. Another option for a solo professional is to form a limited liability company, or LLC. The up-front organization is more complex than for a sole proprietorship; however, an LLC offers advantages that are not available with a sole proprietorship.

Advantages of LLC vs. an S-Corporation

A limited liability company (LLC) is a form of business organization authorized by state statutes to accommodate business needs for limited liability, pass-through taxation and operational flexibility. An S corporation is a corporation that enjoys limited liability, as well as pass-through taxation under Subchapter S of the Internal Revenue Code, as long as it meets certain standards. Each type of entity offers certain advantages.

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