LLC vs. Corporation

PROS

CONS

• Fewer formal rules: An LLC usually has fewer legal formalities than a Corporation. For example, LLCs typically do not need a board of directors or shareholder meetings.
• Separate business entity: An LLC creates a legal business entity that is separate from its owners. This gives you personal asset protection if the company gets sued, not you (unless you did something illegal or ignored the rules).
• Tax options: LLC owners can choose from several tax classifications. . The default is pass-through taxation (taxes are paid out of the owner’s profits), but you can elect S-Corp or C-Corp tax status.
• Flexible structure: An LLC can have one or many owners — called “members.”
• More privacy (in some states): Many states do not require LLC member names to be listed publicly.

• May be less appealing to certain investors: LLCs do not issue stock, which may limit investment options for some businesses.
• Ownership transfers can be harder (or easier): Transferring ownership often depends on the LLC’s Operating Agreement and the approval of other members.
• State fees: Most states charge annual fees for LLCs.
• Separate finances required: Business and personal money must be kept apart to maintain the LLC structure.

PROS

CONS

• Separate legal entity: Corporations offer limited liability, meaning the business is legally separate from its shareholders (in other words, shareholders are usually not personally responsible for business debts).
• Can issue stock: Corporations can sell shares and may be able to attract outside investors or venture capital.
• Ownership is easier to transfer: Selling or transferring shares can allow ownership to change more smoothly.
• Long-lasting structure: A Corporation continues to exist even if owners or leaders change, unless the business is formally closed.

• More formal rules: Corporations must follow set procedures, such as having a board of directors, holding annual meetings, and keeping meeting minutes.
• Possible double taxation: C-Corps pay taxes at the corporate level, and shareholders may pay taxes on dividends. (Other tax options may be available to some corporations.)
• More paperwork and higher costs: Corporations often require more documents and may have higher formation and maintenance costs.
• Less flexible roles: Corporations use defined roles—shareholders, directors, and officers—each with specific responsibilities.

TOPIC

S-Corp

C-Corp

Legal protection

Liability protection for owners.

Liability protection for owners and shareholders.

Taxes 

The default is pass-through. But you can choose to be taxed like an S-Corp or C-Corp.

Owners

One or more members.

One or more shareholders.

Ongoing rules

Annual reports in many states. Meeting requirements are less formal, often optional.

Annual reports in many states. Must have a board, annual meetings, and meeting minutes.

Credibility

Flexible and often more private.

Key Takeaways

• Both LLCs and Corporations protect your personal assets if the business gets sued or owes money.
• LLCs are often simpler to run with fewer rules and less paperwork than Corporations, but don't allow owners to issue stock.
• Corporations often have more formal requirements and can issue stock to investors, but can make it easier to get investors because they can sell stock.