The difference between LLC and Inc is a subject of much confusion. In this comprehensive guide, you’ll learn about the primary differences between the two options. 

What is a Difference Between LLC and Inc

Let’s discuss the main differences between LLC and Inc. 

LLC is an abbreviation for a limited liability company, and Inc is an abbreviation for a corporation. 

LLC and Inc both are business structures recognized as legal entities in the US. They have the same primary function: to protect their owners, or members, from personal liability. They differ in how they’re owned, managed, taxed, and required to maintain reports and records.

difference between LLC and Inc

What are the Key Differences Between LLC and Inc

The Limited Liability Company and the corporation are the two most common business structures in the United States. 

The primary purpose of both business structures is to protect the owners from personal liability, but they have some important differences which are:

LLC vs. Inc: Ownership

Owners of either type of business can be individuals or other companies. An LLC can have any number of owners, while an Inc. can have no more than 100. However, an individual who wants to create a business should generally choose an LLC because it offers greater flexibility in managing ownership interests—an LLC can have as many members as you want and can change some aspects of its structure without dissolving.

LLC vs. Inc: Management structure

In both cases, the owners manage the entity by appointing managers to oversee daily operations. An LLC is managed by its members directly or through a manager or managers who may be members or non-members. An Inc.’s board of directors manages its daily activities through officers such as a president, secretary, and treasurer whose titles depend on the type of company (for example, a C corporation has a chief executive officer).

LLC vs. Inc: Taxation

The main difference between an LLC and a corporation is that an LLC is considered a “pass-through” entity for tax purposes, while a corporation is considered a “separate taxable entity.” That means that income earned by your LLC passes through the company to be taxed on your personal income. On the other hand, Corporations are required by law to pay income tax on their profits.

LLC vs. Inc: Reporting and Recordkeeping

State laws governing corporations and LLCs require that the entity is in good standing to maintain its limited liability protection. This means that annual reports and/or franchise taxes are due based on the business’ entity type and the state in which it is formed. Both corporations and LLCs have annual reporting requirements, but the specific rules governing each vary from state to state.

LLCs are typically required to submit an annual report or “certificate of existence” with their home state. This certificate must be filed each year with the Secretary of State’s office where the LLC was originally formed. The filing fee is $50-$200, depending on what state you’re doing business in. 

While Corporations have to also file a report, called a “franchise tax” or “annual corporate franchise tax,” with their home state. However, this report is due by June 15 of each year, instead of at any given time during the first half of the year. The amount of your franchise tax will be determined by your corporation’s net worth as well as its location within the state where it was formed.

Conclusion

In this complete guide, I told you all the primary differences between LLC and Inc and I fully explained them. I hope you find this guide helpful.

If you are thinking to start an LLC in the United States and you do have not enough time and expertise to handle the paperwork yourself then you should hire a professional business formation service, and luckily you are at the right place.

Micahguru Formation would like to help you start your business in the United States. Last year, we helped more than 150 new companies get registered.