The business world is always changing, and if you’re considering registering a Limited Liability Company (LLC), one of the first things you need to know is: is an LLC a corporation? With the all the new legal nuances businesses must consider at an ever-increasing rate in the digital age, understanding the different reasons LLC’s and corporations are the same, and different, can be confusing. Consulting with counsel experienced in local regulations in the city of Chicago is a great way to make sure you know the details of what makes an LLC and a corporation unique.

Fortunately, UpCounsel and its network of experienced attorneys aid businesses from all sizes, from small to large, understand the finer points of LLCs and corporations. UpCounsel attorneys have an average of 14 years experience, enabling them to provide high quality, cost-effective legal services. What’s more, UpCounsel’s attorney profiles display client ratings and reviews of recent work, so you’re sure to recognize top quality lawyers and counsel.

Before you move forward with registering your LLC or corporation, this article will answer the question: is an LLC a corporation? It will dissect the similarities and differences between the two business structures. There are many tax implications your business will face depending on which one you choose, so understanding their nuances is key to making the right decision.

What are the differences between the LLC and corporation?

LLC’s and corporations are different in a few ways. While both offer limited liability to its owners, LLCs are owned by members, while a corporation can only be owned by its shareholders. Corporations are required to issue stock, but LLCs don’t have to issue any to its members.

LLCs also have the option to be taxed as part of the owner’s individual tax return, while corporations must be taxed as separate entities. This means that profits will be considered the individual’s income, and profits will be allocated to each members based on their percentage ownership. In addition, LLCs only have to file an informational tax return each year, while corporations have to go through a more complex process of filing an income tax return.

Furthermore, LLCs are easier to form and need to file fewer forms than corporations, as well as require fewer formalities like annual meetings and minutes from the meetings. While corporation may have a board of directors, LLC’s do not require this.

What are the similarities between the LLC and corporation?

One major similarity between LLCs and corporations is the limited liability they offer owners. This means that if the company were to go bankrupt, the owners would not be responsible for paying off any debt. In addition, because both LLCs and corporations are considered separate business structures, they can own assets, enter into agreements on their own behalf, and sue or be sued by other entities.

Besides having limited liability as a shared common thread between LLCs and corporations, both entities are also independent legal entities that have the ability to act as entities in their own right.

What makes an LLC and Corporation Different?

Besides the differences listed above, there are also other processional considerations to keep in mind when it comes to LLCs and corporations. For example, LLC members and shareholders are both able to take part in management of the organization. For businesses that plan to have a single owner, LLCs are more likely to be beneficial than corporations due to their simpler structure and filing requirements.

As mentioned, LLCs have to file only an informational tax return each year, while corporations must go through a more complex process of filing an income tax return. LLCs also cannot sell stocks or raise capital through the sale of shares, and must also include additional members and assets to qualify for taxation as corporations.

Finally, LLCs aren’t viewed with as much prestige as corporations, though if you’re still unsure of which entity is right for your business, consulting with experienced local counsel in the Chicago area is advisable.

Final considerations

As you can see, both LLCs and corporations do have a number of similarities, though LLCs are typically easier to form and have fewer filing requirements than a corporation. LLcls also cannot sell stocks or raise capital through the sale of shares, and must have multiple members and assets to qualify for taxation as a corporation. Ultimately the decision of which form of organization you decide upon should be made after consulting with experienced counsel in the Chicago area. Doing so will help ensure your business’s success.

Topics:

LLC,

Corporation,

Business Law