When considering forming a business, a common question asked is “Is an LLC a corporation?” Unfortunately, the answer is not that straight-forward, as there are several business structures which may offer comparable and alternate advantages. Business owners in the Dallas/Fort Worth area may benefit from exploring the differences between LLCs, corporations, and other business structures to determine which offers the most suitable solution to their business goals.

When researching the legal entity of business structures, it is best to work with an experienced attorney who understands local regulations. UpCounsel attorneys have an average of fourteen years of legal experience and can offer professional insight into business laws and regulations. By accessing the UpCounsel network, clients can review experienced attorneys' profiles and ratings to find the lawyer who best aligns with their business' needs.

To better understand the difference between LLCs and corporations, it is essential to examine the taxable structure, ownership division, limited liability, and ownership transferability.

Tax Structure

One of the major distinctions between LLCs and corporations is the way taxes are allocated. LLCs are usually considered a "pass-through entity," allowing the owners to be taxed on a " Flow-Through basis," meaning that the business profits are reported on the owners' personal tax returns and are subject to the personal income tax rate instead of corporate tax rates. Conversely, corporations are subject to "double taxation," in which profits are taxed first at the corporate level, then again at the individual level. For business owners in the Dallas/Fort Worth area, it is essential to consult an experienced attorney to determine what business structure best minimizes taxes.

Ownership Division

Another key difference between an LLC and a corporation is the way ownership is distributed. In an LLC, all owners possess an undivided interest in the company. This means that LLC owners have equal management and voting rights, regardless of the amount of money they contributed. Corporations, however, divide ownership between common and preferred stockholders. Preferred stockholders typically have greater voting rights, whereas common stockholders may have less voting rights or none at all.

Limited Liability

Like LLCs, corporations provide their owners with limited liability protection, meaning the owners are not personally liable for any debts the company might incur. Both business structures provide a certain degree of asset protection, making them attractive to investors and lenders.

Ownership Transferability

Finally, another major distinction between LLCs and corporations is the ease of transferring ownership. With a corporation, stockholders can freely exchange shares between themselves, while LLC owners must obtain written permission from other investors before transferring shares.

Ultimately, there is no one-size-fits-all answer to the question “Is an LLC a corporation?” Instead, business owners in the Dallas/Fort Worth area should weigh the advantages and disadvantages of different business types to determine which best suits their individual needs. Working with a trusted legal counsel, like the attorneys on UpCounsel, can help business owners make informed decisions when structuring their new venture.

Topics:

LLC,

Corporation,

Corporate