What’s the Difference Between an LLC and a Corporation?

By Jedidiah McKeehan

We all see business names listed all the time, and these business names often have either, “LLC,” “Corp.” or “Inc.” written after the name of the business.

What do those terms mean?  What’s the difference between them?  How did that company decide between one or the other?  Just based on what sounded better with their company name?

Let’s first discuss what those terms mean.  The term “LLC” stands for “limited liability company.”  The idea being that this kind of company provides owners liability protection against company debts i.e. the debts of the company are not debts that the owners have to pay out of their own pockets.  LLCs are a fairly new concept, having only been around since the 1970s.

The “Corp.” designation is the abbreviation for a corporation. Similarly, “Inc.” means that a business is, “incorporated.”  There is no real difference between these two terms from a legal standpoint.  An S Corporation is one type of incorporated business.

Now what are the differences between the two?  The first big difference you see, but not always, between the two is that a corporation is a “big” business, while an LLC is a “small” business.  Why is that?  That’s because LLCs are often companies which are owned and operated by the members of the LLC while a corporation is owned by shareholders, with the business being run by a board of directors or a manager.  LLCs generally have less formal reporting and management obligations, which often make them attractive to businesses run by only a handful of people.  Further, if the LLC only has one owner, the LLC does not have to file a business tax return.

 

Jedidiah McKeehan is an attorney practicing in Knox County and surrounding counties.  He works in many areas, including criminal, personal injury, landlord-tenant, probate, and estate planning. Visit attorney-knoxville.com for more information about this legal issue and other legal issues.

 

 

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