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LLC AND CORP, Welcome Grady
An LLC is a Corporation. An LLC combines selected corporate and partnership characteristics while still maintaining status as a legal entity.
You can get more info on the subject from SCORE (SCORE is FREE), an accountant, the library or a book store.
Good luck LUCKIEST
A corporation becomes its own entity - meaning that it is treated just like a person. You, as an owner, are either considered a shareholder or employee. The entity is taxed and your income is also taxed (income - meaning paying yourself a salary or your investment returns if you are a shareholder). With a corporation - you must do payroll - even for just one employee and you must hold annual meetings.
But, Corporations do offer personal liability protection. If you corporation is sued - then suer cannot come after your personal assets (your house, your car, your savings, your retirement, etc, etc) in most instances.
LLCs off the same personal liability protection that corps do - but are essentially treated like a sole proprietor - thus all income and expenses flow through to you personally - there are no required payroll (unless you take on employees) and you don't have to have annual meetings.
I would suggest that you spend the time and speak with a CPA that can best advise you on your personal situation.
Business Money Today
THANKS SO MUCH IF YOU WRITE A BOOK I WILL BUY THE FIRST COPY AND FRAME IT ,PUT NEXT TO MY FIRST DOLLAR ON MY WALL
There are actually a number of differences between a corporation and an LLC.
First, let's explore the things that are the same.
Both a corporation and an LLC are creatures of statute. That means you must follow the statutory requirements for each in order to legally establish the legal entity and have it recognized by law. Both the corporation and the LLC provide for the limited liability of owners from the debts and obligations of the legal entity. That means that the individual owners, if the legal entity is properly formed and maintained, will not be individually liable for the debts and obligations of the legal entity. Typically this means the contractual obligations of the entity. If the owner is directly involved in an action that involves the personal conduct of the owner, then the owner may still be liable for the obligations that arise out of that action. For instance, if a lease agreement for renting store space is signed in the name of the legal entity only, then the individual is not going to be liable for that lease obligation, only the entity - whether its a corporation or an LLC. On the other hand, if the individual owner of the entity smacks a demanding customer in the face, then both the entity and the indivudal owner who did the smacking will both be responsible for any liability that arises out of that action.
The individual owner(s) of a corporation are called "shareholder(s)" or "stockholder(s)". The individual owners of an LLC are called "members".
Corporations are governed by the board of directors that are elected by the shareholders. LLCs are governed by Managers or Managing Members who are identified in the LLC's "operating agreement." The operating agreement is the governing document for the LLC. The "by-laws" are the governing document for a corporation.
A corporation must elect a President, and other officers, typically including a corporate Secretary and a Treasurer. There may be various vice-presidents or other officers elected. The officer manage the corporation's activities. The LLC is managed by one or more "managers" or "managing members". An officer of a corporation, or a manager of an LLC, is not required to be an stockholder or member.
The corporation and LLC have many differences, that really provide the reasons for choosing one or the other form of entity for conducting business.
A corporation is required to have annual meetings of shareholders and directors. An LLC is not required to have those meetings.
The shareholders of a corporation have no legal duties or responsiblities owed to other shareholders. The members of a limited liability company have a "fiduciary duty" toward all other members of the LLC. This is a very important distinction that I will address momentarily.
A corporation must be taxed as either a "C" corporation or an "S" corporation. The corporation must file an annual tax return. For a C corporation, a Form 1120 must be filed. For an S corporation a Form 1120S must be filed. The C corporation is taxed on its corporate profits and when it distributes dividends (profits) to the owner-shareholders those dividends (profits) are taxed again to the shareholders. Basically, a form of double taxation.
An S corporation is a flow-through entity for federal income tax purposes. Even though a tax return must be filed, the S corporation does not pay income taxes. All of the items of income or loss flow through to the individual owners (which items are reflected on a Form K-1 that is issued to each shareholder for his/her prorata share of the income or loss items. So, there is no double taxation.
You can choose how your LLC is taxed. It can be taxed as a "disregarded entity" if there is only one owner-member. That means that it does not file a separate tax return, that the sole owner-member reports all of the income tax items on his/her individual tax return on Schedule C. An LLC may also be taxed as a sole-proprietorship, a partnership, a C corporation or an S corporation - at the election of the owners-members. In other words, there is a great deal of flexibility in choosing how to tax the LLC as an entity. Depending on the nature of your business activities there can be substantial tax advantages through the use of an LLC by choosing how the business activities are taxed. There are many nuances involved in determining the most appropriate method of taxation that are far beyond the scope of this reply.
One major difference that is applicable in a number of situations involves whether there is "non-recourse" debt used in the business enterprise. Non-recourse debt typically involves debt that is at the entity level only, and for which the individual shareholders (of the corporation) or members (of the LLC) are not personally liable. A typical example would be the mortgage on a parcel of real estate for which the individual shareholders or members have not personally guaranteed the indebtedness. The big difference is this: the non-recourse debt is not included in the shareholder's tax basis of his/her stock of a corporation, but it is included in the member's tax basis of his/her membership interest in an LLC. The importance of that difference is that a shareholder of a corporation or a member of an LLC may not recognize losses from the operations of the business that exceed the tax basis of their ownership interest. So, an S corporation shareholder, for instance, would not be allowed to recognize tax losses beyond his/her actual investment in the corporation; however, a member of an LLC would be allowed to recognize losses beyond his/her actual investment by including the non-recourse debt of the mortgage in his/her tax basis thus allowing much greater losses to be recognized in the initial years of a business enterprise.
Obviously, the complexity of the tax issues suggests that you do seek the counsel of a competent CPA or tax attorney before deciding which entity is best for your particular business enterprise.
There is one other very substantial difference between the corporation and an LLC that is not tax related, and which almost always dictates the use of an LLC in almost every case. The difference relates to asset protection.
A corporation's shares of stock owned by individual shareholders can be the subject of a creditor's effort to collect against for any judgment the creditor has against the individual shareholder. For instance, if I have a judgment against the shareholder for injuries I suffered in an automobile accident that was caused by the shareholder the amount of which is in excess of his liability insurance coverage, I can "execute" my judgment against the shares of stock he owns in the corporation. If he owns 50% of the corporation, then I can collect against his stock by taking his ownership interest as my own. So now I own 50% of the corporation, which satisfies my judgment claim against the shareholder.
On the other hand, if, instead of having formed a corporation, the person who caused my injuries in the automobile accident has formed an LLC and he is the 50% owner of an LLC, and someone else is the other 50% owner of that LLC, I can not execute my judgment against his ownership interest in the LLC. That's because the owners (members) of an LLC have a "fiduciary duty" toward each other. That fiduciary duty will not be imposed by the law on anyone because it is the highest form of trust that the law recognizes. So, if my LLC has been properly formed (including having been established in a state that recognizes this form of protection), and it has multiple members (this protection does not work for a single-member LLC because there is no one with whom to have a fiduciary relationship), then my judgment creditor can not take my ownership interest in the LLC to satisfy his judgment. So my ownership interest is safe from the judgment creditor. (The judgment creditor will get some rights against the ownership interest, but if the LLC is properly established, and the operating agreement contains the appropriate provisions, those rights a essentially meaningless or may even have negative consequences, and so are seldom sought by the judgment creditor).
The bottom line is, that if you are going to have more than one owner (even if the multiple owners are family members), unless you intend to take your company public, you are almost always going to be in a better position by using an LLC rather than a corporation.
Obviously, these are complex matters that properly deserve the attention of competent and experienced counsel to ensure that you get the proper structure for your business entity and that you choose the proper taxation for your entity depending on its activities. The one thing you should be careful of is that you don't blindly use an S corporation instead of considering the use of an LLC. The LLC can do everything an S corporation can do, plus provide additional asset protection if there will be more than one owner and it is properly structured.
Good luck with your business endeavors.