What are the differences between an LLC and a corporation?

What are the differences between an LLC and a corporation?

An LLC, or Limited Liability Company, offers flexibility and pass-through taxation, while a corporation is a more formal structure with shareholders.

What are the tax implications for each?

LLCs typically benefit from pass-through taxation, meaning profits are taxed on the owners' personal tax returns. Corporations face double taxation, where profits are taxed at the corporate level and again as dividends.

Which one is better for a small business?

It depends on your business goals. An LLC is often simpler and more flexible, while a corporation may be better for raising capital.

Can I convert my LLC to a corporation later?

Yes, you can convert an LLC to a corporation, but the process involves legal steps and potential tax implications.

What are the liability protections for each?

Both LLCs and corporations provide limited liability protection, meaning personal assets are generally protected from business debts.