LLC vs. INC 2

Difference Between LLC and INC 2

LLC and INC are two types of business models. It is very important to identify the way the business is to operate. There are different options as far as the choice of name, receiving recognition from the state, protecting the capital and getting the privileges relating to tax. The two most popular methods to structure a business are LLC and INC. Both have their own set of characteristics with their own advantages and disadvantages. This article is intended to accentuate the differences between the two to make it easy to choose between them according to specific business requirements.

LLC:

LLC is a limited liability company. It is a business started by a member or members, and operates in accordance with a set agreement. It is also called a ‘pass through business’ as all the losses and profits are passed on to the members in direct ratio to their partnership or association with the company and each member pays taxes according to his profits.

INC:

INC or incorporation is a different type of business organization where the profits and losses are reflected back on the company or corporation itself and not on the individual owners. This is an organization, which is regulated by a board, and the board sees all operations of the company. The board consists of important members known as the directors. The company or corporation is taxed differently than a LLC, on a tax based upon corporations.

Difference between LLC and INC:

There are many differences in the structure and the working of an LLC and an INC, which are listed below.

While a LLC has no technical staff, corporations need to have employees at different levels and all paperwork related to the employees must be maintained at all times.

In LLC, each member is taxed according to their profits, as if the income out of the business is their personal income. However, in the case of an INC, the directors are taxed on a personal level; in addition the corporation also is taxed. Thus, it is like double taxation.

LLC operates with cash and credit. INC on the other hand, operates by issuing stocks. The stockowners are truly partners in the organization. INC always has the option to raise their capital by issuing securities.

LLC type of business organization requires lesser paperwork and so money and time can be saved. Corporations are required to hold annual meetings of the Board and the minutes of such annual meetings are published in the interest of the shareholders.

 

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