Starting a business is an exciting endeavor. It could also be an intimidating one. A big part of this is understanding the different business structures, as these will award you with specific powers and restrictions. Two popular business structures are corporations and limited liability companies (LLCs). It is important to understand what makes a corporation or LLC different from the other in order to choose the best structure for your particular business.

In this article, we’ll discuss some of the Frequently Asked Questions (FAQs) regarding corporations versus LLCs. We will review the cost and complexity of setting up the different structures as well as the tax and liability implications of them. Moreover, we will specifically consider the requirements for setting up an LLC or corporation in the state of New York since there are particular rules and regulations that are specific to the state.

What Is A Corporation?

A corporation is a separate legal entity from the individual owner(s). This means that the net financial result of the company is the main concern; losses and gains for the individual owners are secondary. Corporations include features such as limited liability protection for the owners and formal governance structures. These features make corporations more attractive to potential shareholders, allowing owners to offer equity or shares in the corporation for external investments.

The formation of a corporation is formal and complex, involving documents such as the Articles of Incorporation, Corporations Bylaws, and a Corporate Resolution to appoint the Board of Directors. Corporations are created at the state level by the Secretary of State's office, either online or by mail.

In the state of New York, a profit corporation requires a minimum of one shareholder, with at least two directors and a single officer appointed by the Board of Directors. Information and documentation to register a profit corporation includes the name of the business, the purpose of the business, the duration of the business, the number of authorized shares, the name and address of the business and its registered agent's name and address. Filers must also provide the names and addresses of each of the incorporators, along with a corporation's initial registered office address.

What Is An LLC?

Limited Liability Companies (LLCs) are a relatively new concept that was introduced in the U.S. in the 1970s. LLCs are also separate legal entities from the individual owner(s), and feature limited liability protection. However, LLCs are much less formal than Corporations. Documents required to form an LLC typically include an Articles of Organization, Operating Agreement and a Registration of the LLC filed with the Secretary of State's office. LLCs are created at the state level, similarly to corporations, and can be registered online or by mail.

In the state of New York, LLCs require a minimum of one member and may include an unlimited number of members. Documentation to form an LLC includes the name of the business, its purpose, its duration, the business's address, the name and address of the business's registered agent, the name and address of the LLC's organizer, and the name and address of the LLC's members.

Formation & Cost of Setting Up Corporations & LLCs

The process of setting up a corporation or LLC at the state level is similar. The main difference is that the formation of a corporation is more complex and requires more formal documents. In most states, the cost for setting up an LLC is less than that of a corporation.

In the state of New York, the cost of forming a LLC is $200 filing fee plus a $25 biennial statement fee. It is also required to pay a $9 registered agent fee. On the other hand, the cost of setting up a corporation in New York is $125 filing fee, or $135 for filing online, plus a biennial statement fee of $25. Additionally, there is a $9 registered agent fee to pay.


The taxation of corporations and LLCs is very different from each other. Corporations have the option to elect to be taxed either as a C-Corporation or as an S-Corporation. C-Corporations are subject to double taxation, meaning that the income of the corporation is taxed first when it is earned, and then taxed again when dividends are distributed to the shareholders. On the other hand, an S-Corporation is a pass-through entity, meaning that income from the corporation is passed through directly to the shareholder(s) who pays taxes accordingly.

As for LLCs, they are treated as pass-through entities and are taxed only once. That is, the income of an LLC is distributed to its owner(s) who pay taxes accordingly. LLCs may also elect to be taxed as a corporation in certain cases.


The limited liability protection of a Corporation or LLC can be the deciding factor between the two. In the event there are any legal claims or creditors, both forms of entity limit the liability of its owners. As a Corporation, this means that the shareholders are only liable up to the amount they have invested into the corporation. As for LLCs, the liability of the members is limited to the amount of their contribution to the LLC.

Wrapping up

It is important to understand the differences between a corporation and an LLC before deciding which form of entity suits best your business. They both offer limited liability protection for the owners, with the LLC offering more flexible structures and less formal documents. Both structures are formed at the state level and require filing documents and paying certain fees. Moreover, the taxation of the two are different, with C-Corporations being subject to double taxation and LLCs passing the income through to the owners, who are taxed accordingly.


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