Difference Between LLC and Inc (Corporation)

So, you have decided to go from sole-proprietorship to something more recognized. Since you’ve been bombarded with so much information, you’re not able to decide what the right thing to do is? To go for LLC (Limited Liability Company) or stick with a corporation.

Well, in this article, we will break down the difference between LLC vs. Inc so that you can easily decide what you should do. The first thing you need to think about is your vision. Do you want to have a full-fledged public company that will serve thousands and thousands of customers? Do you want to issue shares to the public? Do you want to have more owners on board?

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Depending on what you want, you should decide.

Let’s say you want more owners on board, and then you should go for LLC. However, LLC won’t fit the bill if you aim to issue stocks shortly. It would be best if you choose a corporation. Ultimately the objective of forming a new entity will determine whether you should go for an LLC or Inc. If the objective doesn’t matter and you want a quick solution, the best bet would be an LLC. Why? Because forming an LLC will require less paperwork. That means you could save more time. Plus, you need to pay anything between $100 to $800 to file the articles of organizations with the State Secretary.

However, LLC has a major demerit. In LLC, the members must pay self-employment taxesSelf-employment TaxesSelf-employment tax is the tax towards social security and Medicare, paid by a self-employed person who has net earnings of $400 or more for the concerned tax period towards the federal government reported through form 1040 schedule SE.read more on their salary/profits. On the other hand, Inc needs a prodigious amount of paperwork. Moreover, once you form an Inc, you need to go through a huge amount of record-keeping.

LLC vs Inc (Corporation) Infographics

Let’s see the top differences between LLC vs. Inc (Corporation).

Key Differences

  • If you’re planning to create a giant company, a corporation can be the right choice for you. And for a small or mid-sized organization, LLC would be the right choice.If you want to form an LLC, you need less paperwork. On the other hand, forming a corporation requires a huge amount of paperwork.If you form an LLC, you won’t issue shares shortly. If you form a corporation, you will issue shares shortly.For LLC, there’s single taxation applicable. For a corporation, on the other hand, double taxationDouble TaxationDouble Taxation is a situation wherein a tax is levied twice on the same source of income. It usually occurs when the same income is taxed both at corporate as well as at the individual level.read more is applicable.In the case of an LLC, the entire ownership is owned by the members of the LLC. In the case of a corporation, the ownership lies with the shareholders, but the management manages everything.

LLC vs Inc Comparative Table

Final Thoughts

If you want to scale your business to a giant organization, a corporation would be the right choice. But if you want to form a quick, limited liability organization without much paperwork, then an LLC would be the perfect bet. You would also earn better flexibility in taxation in the case of an LLC.

This has been a guide to LLC vs. Inc (Corporation). Here we discuss the top differences with infographics and a comparative table. You may also have a look at the following articles for gaining further knowledge –

  • LLC – Full FormLLC vs CorporationInc – Full FormLLC vs PartnershipEvergreen Loan