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Difference Between Corporation and LLC

Starting a new Business is a completely confusing process which involves lots of decisions from the founders. The first and most important decision is to start the company as Corporation or the Limited Liability Company. Both are different things and boasts different features and that’s the most confusing part of starting the new business. When you decide to start a new business, as a founder, you have to create a Legal Entity for the business, which is either Corporation or the LLC.

But, what is the difference between a Corporation and LLC? Is it totally different or have some similarities? Well, we are going to clear all your doubts in this post. In this article, you are going to understand the difference between a Corporation and LLC. Also, you’ll be able to understand the procedure of creating an LLC entity for starting your business operations.

Difference Between Corporation and LLC | Benefits of Starting an LLC

  • Flexible Taxation

One of the most important differences between the Corporation and LLC is the Taxation. Almost all of the Limited Liability companies enjoy the flexible taxation system, whereas the Corporations don’t receive special tax benefits from the local governments. When you decide to start an LLC and apply for it, you have the choice to choose the Taxation system you want. You can choose between Sole Proprietorship, Partnership or Corporation as a Taxation system. This flexibility is absent when you create a Joint Stock Company or Corporation according to the Companies law of your country. As an LLC founder, you have to get desired tax ID and choose the taxation system and you are ready to go. Here is a resource on How to Get a Tax ID number on

  • Ownership

This is the second most important difference between the corporation and LLC. In the case of Corporation, the Ownership is divided between the investors and shareholders. But in the case of LLC, the ownership is divided into the Owners and the investors only. All of the profits and losses that an LLC will procure will be equally distributed into the Owners of LLC, which are fewer than the Corporation, where there will be thousands of shareholders to divide the profit. In the LLC, you can control how many and which people to join the company as Partner or investor. There is no control on providing the ownership in the corporation.

  • Formation

The formation of the corporation is quite a tedious task. There are tons of formalities to complete before you can create a Joint Stock company or the corporation. But, there are minimal formalities of registering Limited Liability Company. In most of the modern countries, businessmen can perform LLC online filing and complete the given procedures to complete the LLC filing.

Creating a corporation is not that easy as creating the LLC. As a founder, you literally have to complete the paperwork prescribed in the Companies Act of the country, physically file the paperwork and then get the Certificate of Incorporation to start the business under the name of Corporation.

  • Management

The role of Management in Corporations are crucial for the operations. You have to be strict in laying out the Managerial structure complying with the Companies Act of the country. You have to appoint a CEO, CFO, Board of Directors and tons of other managerial positions. There is no such restriction of Management in the Limited Liability Company. You can be fluid in the Management of the Business as you and your partners can perform the Managerial tasks as agreed beforehand.

Final Words | Which one is Better? Corporation or LLC?

The Corporation and LLC have their own advantages and disadvantages. The Corporation Structure is best if you are looking to start a business with the huge amount of funding and will perform large-scale operations. But, the LLC is the way if you are just starting out and running the business on small scale with minimum available investment.

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