The decision to choose between a corporation and a limited liability company sometimes puts you into deep thoughts as they both offer different advantages. An LLC is owned and governed by numerous stakeholders, whereas a corporation is owned by one or a handful of individuals only. These enterprises protect the owners’ liability contribution and do not concern them when they repay business loans, raise debt, or other dues. Before investing in business formation, it is imperative to realize which business structure would suit your business requirements. It should also meet the industry type and operational scale of the business.
According to government surveys, owners of a new business enterprise tend to go for a Corporation structure which allows the owner to stick to his/her fixed share of liabilities set as per the company policies and does not require to charge any personal assets. Both structures have their existence as entities; however, the key differences between a corporation and LLC define its operational measures. Your business would either way benefit from both the structures; therefore, it requires in-depth knowledge and understanding of both the types, things they offer, and liabilities linked to their working to form one business entity.
Even though this decision to choose between a Corporation or an LLC takes ample time, resources, and efforts, it impacts the firm’s future credibility. It shapes the image of a trustworthy enterprise. Having that said, it is essential to consider significant differences before concluding as to which entity you should select and how to make a corporation in NY.
Differences Between An LLC and Corporation
Once you are clear with both the entity types’ basics, you should deep-dive into the differences between the same. The following are a few parameters that differentiate LLC from a Corporation –
- Formation – If you want to construct an LLC entity, you need to fill out documents such as Articles of Organization along with the state’s business agency authority. Details such as company name, address, policies, and founder/owner names are mentioned in this form. It also defines the owners’ roles and responsibilities, the number of shares allotted to each owner, and acts as a good blueprint of the company code. On the other hand, a corporation requires you to fill articles of incorporation along with the state’s business agency authority. The form also contains similar fields to be filled out by the owners, but in addition to that, a corporation requires to follow a few more steps to set up and initiate the working of the entity.
- Ownership – It refers to choosing a business structure that defines the owner’s role and responsibilities and displays the ownership of business operations. In a corporate business entity, the company shares are allotted to stakeholders. The corporation includes shareholders who further elect a board of directors; then they appoint CEO, CFO, COO, and many other people with supreme authority to look after the business operations. However, in an LLC, the owners are called Members of the LLC and manage the business’s day-night working.
- Taxes – Subject to tax payment is the prime parament of difference between an LLC and a corporation. If your business entity type is a Corporation, you may have to opt for a C-corp tax system that binds you to pay income tax on your tax returns. This is a hefty process as it involves double taxation, one at the business level and another when the stakeholders get their dividends and return on invested shares. If we talk about taxes for an LLC, the owners need to pay taxes on the personal income-tax return rates. You can check more about independent contractor taxes guide and also LLC tax guide to get some idea about taxes that you need to pay.
- Paperwork – Government paperwork and adherence to policies are an essential task for corporations, as they must follow government-formed policies in their day-to-day operations. Procedures such as forming a board of directors, incorporating corporate laws, holding quarterly meetings with shareholders, and maintaining share records, need to be strictly followed throughout their business’ operational life. But, in LLC’s case, there are hardly any strenuous paperwork or policies that need adherence.
Business entities about to begin their formation process require clear assistance for filling out necessary forms and seeking help from outsourcing resources. We at Windsor Corporate Services help you register your business entity, whether big or small, with our years of experience and team of professionals. Our services include:
- Filling out the requisite company forms for newly formed corporations.
- Taking into account their accounting and legal needs.
- Partnering with state firms to bring an effective revolution in the formation of a business.
Our clients experience the highest quality parameters while we cater to their organizational requirements. Contact us today to begin an easy paperwork process!