Difference between LLC and INC

Key difference: An LLC or a limited liability company is a legal form of company that provides limited liability to its owners. INC or Incorporated is the forming of a new business, whose legal entity is separate from its owners.

In order to do business in any country, state or city, the company must register with the government of the said state and country in order to establish itself as a legal entity. There are various different types in which a company can register to become a legal entity, which includes corporation, incorporated, limited company, public limited company, private limited company, Limited Liability Company, etc. These different types of allow the company to avail different benefits that are offered with the name. Incorporated (INC) and Limited Liability Company (LLC) are two of these confusing legal terms and are different from each other in many ways.

An LLC or a limited liability company is a legal form of company that provides limited liability to its owners in majority of jurisdictions. The LLC can be for profit or not for profit. Basically, LLC combines certain characteristics of both a corporation and a partnership. However, an LLC is a type of unincorporated association, not a corporation. It is often more flexible than a corporation, and it is more suited for companies with a single owner.

LLC owners are not liable for any debts and liabilities of LLC. LLCs also provide tax efficiency and operational flexibility of a partnership. LLCs do not require holding regular meetings of board of directors and shareholders, as opposed to a corporation. LLCs salaries and profits are subject to self employment taxes. LLCs do not issue stock.

INC or Incorporated is the forming of a new business, whose legal entity is separate from its owners. Registering under Inc. allows a business to be recognized as a person under the law. The incorporation could be a business, a non-profit organization, sports club, or a government of a new city or town. Incorporated is similar in all aspects to a corporation, however if registered as Inc instead of corporation, all legal documents as well as the name of the company will show Inc. For example MyBusiness Inc. and MyBusiness Corp. are two separate entities and will count as so in all papers, though they are offered the same benefits and are very similar in nature.

An Inc. is a separate legal entity, which is owned by shareholders. It has legal rights and liabilities, and may work for profit or not for profit. It is usually created with the intention of making profit. The profit is first reinvested in the incorporation and then among the stockholders in the form of dividends, as decided by the president of the corporation. The incorporation is a separate legal entity, and the blame does not fall on the stockholders, but on the corporation itself and possibly on the board of directors. The owners are not directly affected by the profits and losses of the company, which are passed on to the shareholders. In case of dissolution, the company would require approval from the stockholders as well as the government.

 

LLC

INC

Stands for

Limited Liability Company

Incorporated

What is it

LLC is a type of legal structure that provides the limited liability similar to a corporation and the tax efficiencies and operational flexibility of a partnership.

A legal entity which is separate from its owners.

Suitable for

Small businesses.

Corporations or limited companies.

Ownership

Members

Stockholders

Management Level

Only Members and managing members of the company.

Run by a board of directors. Requires the company to appoint company officers.

Members needed to set up

1 or more

1 or more

Taxation

Single taxation (Profit or loss are passed directly to members).

Corporate tax. Profit and loss are passed onto the company and does not affect the members.

Legal entity

Separate entity from shareholders, but members may be held liable for non fiscal obligations.

Separate legal entity from owners and shareholders.

Regulation of entity name

Differs with each state but mostly LLC or L.L.C. is added.

Incorporated (Inc.) or Corporation.

Continuity of life

Indefinite term until members vote to terminate.

Indefinite term

Liability

Limited

The stockholders are not held responsible in case of a fault, the corporation is.

Paperwork and records

Not much paperwork is required. Annual state reports are required to be filed with the appropriate fee; can file by mail but most states allow or mandate online filing.

Paperwork and records are a must as the company has a separate identity. Also profits and losses will be passed onto the company and not members.

Image Courtesy: referenceforbusiness.com, decisionstrat.com

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