When you file the paperwork to incorporate your business, you can choose between turning your company into an LLC or a corporation. The distinction between the two can have a great impact on your business's success. Here are the primary distinctions you'll need to know before you make your decision.

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A corporation can be classified as an S or C Corporation, and all corporations must adhere to strict business law requirements. Corporations have to follow a number of standards designed to maintain a certain level of professionalism and formality. An LLC must still follow most of these requirements as well, but they aren't as strictly enforced. In a corporation, for instance, you must maintain accurate and regular business records for all meetings and transactions. With an LLC, you still have to maintain records, but you don't have to keep as many, or keep them in as much detail, though it's generally a good idea to be precise and meticulous.

Taxation offers one of the biggest distinctions in the LLC vs Inc debate. Corporations can only file taxes as corporations, and they cannot switch between corporate forms. LLCs, on the other hand, can petition to be taxed as a sole proprietorship, partnership, C Corporation, or S Corporation, depending on whether they qualify. Theoretically, they can apply for multiple changes, but it's not advisable. Another distinction is that corporations don't actually have to pay self-employment taxes, despite the fact that C Corporations have double taxation. LLCs, on the other hand, must pay self-employment taxes unless they choose to be taxed as corporations. But, an added benefit for LLCs is that they can actually deduct any operating loss that the LLC suffers from personal income taxes. S Corporations can sometimes do this if they qualify, but C Corporations can't.

It’s a good idea to get a lawyer’s recommendation when deciding between an LLC and a corporation. We can help you get the free legal advice you need. If you'd like more information about starting a business, be sure to check out our guide.

Get started Start Your LLC Answer some questions. We’ll take care of the rest.

Get started Start Your LLC Answer some questions. We’ll take care of the rest.