Differences Between LLCs and Corporations

What are the differences between LLCs and corporations in Coral Springs? This may seem like a complicated question but that is why we at Reinfeld & Cabrera P.A. are here to help you decide which business model best suits your needs.

To help you get your head around things it is important to remember that corporations in Coral Springs can be broken down into S corporations and C corporations.

The most important difference between S corporations and C corporations, simply put, is based on taxation. C corporations have one tax, on a corporate level, on its net income, and another tax to the shareholders when distributions are made. In contrast, S corporations have only one level of taxation and all of their income is allocated to the shareholders. In spite of this C corporations have better tax planning flexibility and have the ability to protect shareholders from direct tax liability. S corporations, on the other hand, are restricted by limitations, such as the number and type of shareholders they can have (no more than 100 shareholders, and shareholders must be US citizens/residents). C corporations have no restrictions on ownership.

Now that you know the basic differences between S corporations and C corporations, lets move on to understanding what LLCs are. LLC stands for Limited Liability Company. LLCs combine the corporate advantage of limited liability protection with the partnership advantage of pass-through taxation. Thus the LLCs income is not taxed at the entity level; however, if the LLC has more than one owner a partnership return should, in general, be completed. Income or loss is passed through the LLC and reported on owners’ individual tax returns.

When considering incorporating a small business in Florida, LLCs or S corporations are arguably top choice. Therefore we have decided to break down the differences between these two formations for you.

Firstly LLCs cannot issue stock. Instead they offer “memberships.” In contrast S corporations can issue stock and are owned by the shareholders. Secondly members or hired managers directly manage their LLCs. In comparison directors and officers manage S corporations. S corporations have certain restrictions that are not applicable to LLCs. One such example is that S corporations are limited to 75 shareholders, while LLCs are not restricted in their number of members. Finally while LLCs have a limited life span of approximately 30 years, S corporations have an unlimited life span.

With all this in mind, you should have just enough information to begin the process of incorporating your business. With the help of experienced attorneys such as Reinfeld & Cabrera P.A. the differences between LLCs and Corporations should be but a small hurdle on your road toward success.