Frequently Asked Questions: Business Law
What is the difference between a corporation and an LLC?
As an initial matter, both corporation and LLC provide the owners with limited liability protection. The legal differences between the two are in how they are structured and the formalities they are required to follow. LLCs are created by filing a simple certificate of organization and are internally governed by an operating agreement. LLCs have members (the owners) and managers. Corporations are created by filing articles of incorporation and are internally governed by a set of bylaws. Corporations have shareholders (the owners), directors and officers (president, vice-president, secretary and treasurer). In addition, corporations are required to have regular meetings of stockholders and directors, are required to keep minutes of meetings, are required to give notice of meetings, etc. In general, LLCs have fewer layers of corporate governance and are subject to far fewer formalities. Business owners should also be aware that there are various tax elections and consequences associated with limited liability entities.