LLC vs. Inc: The Main Differences


Typically, when forming your company, most people are wanting to know which is better to have…and LLC or an INC. Each one has its pros and cons and so choosing one is dependent on the needs you have for the business. We will provide you with an overview to help understand the differences between them.

LLC vs. Inc: Tell me why it matters…

For the most part, and for business purposes, an LLC and an Inc are very similar. Your customers will not notice any difference. They are both separate legal entities from the their personal owners and they carry their own assets and liabilities. For each, the company owners are not personal liable for company debts or lawsuits brought on against the company. This personal protection is one of the major reasons many people whether a small business, mid-size, or very large company with hundreds of employees choose to incorporate or form an LLC.

How do they differ from one another? At a finer detail level, each entity structure must follow separate business regulations and abide by different tax guidelines which are often times deciding factors whether to form an LLC or an Inc.

The Advantages of LLCs

Below are particular reasons why an LLC may be the right option for your business:

    Flexibility: LLC have more flexibility and simpler regulations and reduced paperwork than an Inc. Corporations are required to hold annual shareholder meetings which are not the same with an LLC. And often times there are reduced fees and associated paperwork with an LLC.

    Pass-Through Taxation: With an LLC, you avoid double-taxation with occurs with an Inc. Double taxation occurs when the net profits of the corporation are taxed first, then again after then individual owners receive payments. With an LLC you avoid initial company taxes and are only taxed once it is received at the individual level.

    Deducting Losses: As a member of an LLC, you are able to deduct company losses on your individual tax return, which cannot be done on most Inc.

    If you choose to create an LLC, we will complete all paperwork for you and have it drop shipped right to your door.

    Number of Owners: With an LLC, there is no limit to how many persons can own one.


When an Inc. May Be Suitable:

The LLC structure has many advantages for you, but sometimes an incorporation may work better for your situation:

    Employee Benefits: When owning a corporation and providing your employees with job benefits, such as medical insurance, life insurance, and parking, and incorporation will avoid them from paying taxes on those benefits. Employees of an LLC are required to pay taxes on these benefits.

    Self-Employment Taxes: The salaries (not the profits) of a corporation are subject to self-employment taxes. With an LLC, both salaries and profits are hit by self-employment taxes.

    Additional Tax Benefits: It is beneficial to create an operating agreement, especially if you plan to have more than one member, although it is not legal necessary.

The LLC structure provides significant beneficial value and increased flexibility, although corporations also have their benefits. Make sure to carefully the pros and cons of each business model deciding which company structure you would like to create.

About me

I'm Enrique M. Carini and I work in a law firm in Texas. I like my job. I created this blog to share what I know in this law field. Hope that you may find the posts useful. Thank you for dropping by.


Make a free website with Yola