Figuring out whether you need to be an LLC or a C Corp can be pretty confusing. Our Peachtree City business lawyers are here to help you figure it out. They are both corporate structures designed to protect the owners from liability but they are not identical. For example, an LLC combines the benefits of a partnership with the benefits of a corporation and have both single taxation and limited liability.
To really understand the differences between an LLC and a C Corp you will need to compare a variety of factors.
For instance a C Corp:
- Is suitable for medium to large businesses with a lot of shareholders
- Has double taxation. This means that the company pays a corporate tax rate of around 34% but the shareholders still have to pay a 20% tax on dividends and profits
- Uses a board of directors and officers
- Has shareholders as owners
- Exists as a separate entity from the shareholders so they usually can’t be held liable for debts and obligations
- Requires formal board meetings and shareholder meetings where minutes must be kept. Annual reports also have to be filed
- Has limited liability
- Has an indefinite life span
While an LLC:
- Is better for smaller businesses with very few shareholders
- Passes profits directly to the members unless they elect to be taxed as a corporation
- Uses members and managing members for the management level
- Is owned by the members
- Exists as a separate entity from the partners but the members can still be responsible for non-fiscal obligations
- Is taxed as a Single Member LLC or partnership by default and a S or C Corp by election
- Does not require much paperwork other than an annual report that needs to be filed with the appropriate fee
- Does not require board meetings or shareholder meetings but should have some kind of advisory board
- Has limited liability
- Has an indefinite life span
When building your business you want to make sure that you understand each piece of putting it together. Call our Peachtree city business lawyers today to schedule an appointment to discuss all the legalities of building your first business.
