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2 November 2023

C Corporation Vs LLC | Difference | Comparison

Both C Corporation and LLC are recognized commercial entities that need to be registered and kept up to date at the state level. Either form of business requires a distinct name and the designation of a registered agent in order to accept mail. Liability protections, tax alternatives, and indefinite periods are the main structural similarities between LLCs and C corps.

What is a C corporation?

The ideal corporate structure for companies wishing to return their profits inside is a C corporation, Which is a recognized legal entity by the IRS. A  C corporation is subject to two types of taxation: Primary income tax at the corporate rate, and secondary income tax paid by shareholders when they earn dividends.  C  Corporation is required to adhere to various corporate formalities and report performance in an annual report. Like an LLC, the legal form of a C corporation restricts the financial responsibilities of its owners.

In America, C businesses pay the majority of their taxes. A lot of small firms decide to elect to have their corporations taxed as S corporations. 

What is LLC?

A limited liability company is an entity that combines the flexibility advantages of a partnership with the limited liability protection of a corporation.  Owners of an LLC are its members, and an LLC may have one or more members.  Nonetheless, LLC owners can choose to be regarded as either sole proprietors or general partners in order to avoid this double taxation. In that case, the LLC is not taxed on its profits; members only pay personal income tax on the revenues on their individual tax returns. This is referred to as pass-through taxation. Most small and medium-sized enterprises prefer an LLC over a corporation because it provides liability protection and has fewer regulatory requirements.

C corporation Vs LLC | Difference between C corporation and LLC

  • C corporation is suitable for medium-sized to large businesses with many shareholders. On the other hand, LLCs are smaller businesses with few shareholders.
  • The management level of C corporation is officers, and the board of directors, the Management level of C corporation is only members and managing members of the company.
  • C corporation of ownership are shareholder, Members are owners of LLC.
  • C corporation is double taxation, Company income is taxed at the corporate tax rate, and shareholders also pay tax on dividends or profits distributed. LLC  is single taxation, profit or loss are passed directly to members. It has the option to choose to pay corporate taxes.
  • Both C corporation and  LLC  is an indefinite term.
  • The legal entity from shareholders, who cannot be normally held liable for any fiscal obligation in a C corporation, While LLCs are separate entities from partners, but members may be held liable for nonfiscal obligations.
  • There must be official board and shareholder meetings and minutes. Annual state reports are also required to be filed in C corporation. On the other hand, Not much paperwork is required in an LLC. Annual state reports are required to be filed with the appropriate fee and can be filed by mail but most states allow or mandate online filing.
  • Formal shareholder and board meetings are required in C corporation. Whereas LCC is not necessary for shareholders, but should have recorded activities and/or advisory boards.
  • There is n choice of taxation structure given in a C corporation. A C corporation's profits are subject to corporate taxation at the applicable rate. But in an LLC choice of taxation structure is given. It is a single-member LLC-SMLLC or partnership for multiple members by default and an S or C corporation.
Thanks for reading the article. Still, if you have any questions or queries in your mind on the C Corporation Vs LLC then please ask us in the comment section below.

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