A Limited Liability Company, or LLC for short, is a hybrid business structure that combines the best characteristics of a Corporation with the best characteristics of a Partnership.
When you form an LLC you have the limited liability aspects of a Corporation combined with the Partnership advantage of pass-through taxation.
Although the LLC is a fairly new form of doing business in the United States, its flexible structure and simple ownership has made it one of the most popular business structures in use today. The LLC is an ideal tool for owners of small companies who are looking for asset protection, but want less complexity and paperwork when running their business.
The following table provides a look at the LLC vs Corporation, and LLC vs S-Corporation. Tax comparisons can be found in the lower portion of the table.
C-CORPORATIONView the Details Incorporate Now
LLCView the Details Incorporate Now
S-CORPORATIONView the Details Incorporate Now
Stock, there may be different classes.
|Membership interests. There may be different classes of membership.||One class of stock. Which may be voting or non-voting.|
|Eligible Owners||No restrictions.||No restrictions.||100 shareholder limit. No non-individual and no non-resident alien shareholders.|
|Management||Managed by director(s) and officer(s).||Two Management Types
- Managed by Manager
- Managed by Members
|Managed by director(s) and officer(s).|
|Allocations of Ownership||None. Dividends must be paid based upon stock ownership.||Permitted if the allocations have substantial economic effect.||None. Income, gain, and loss pass-through to the shareholders based on the percentage of shares owned.|
|Liability Protection||There is limited liability for shareholders, officers and directors.||There is limited liability for members and managers (if applicable)||There is limited liability for shareholders, officers and directors.|
|Duration||Perpetual||Dissolves at the time specified in the Operating Agreement or upon the loss of a member unless other members agree to continue.||Perpetual|
|Transfer of Ownership||Shares freely transferred.||There may be restrictions under certain state laws.||Shares can be transferred only to eligible S-corporation shareholders|
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