Preparing to Launch

LLC vs INC: The Great Business Structure Debate

If you are thinking about starting your own business, or even if you are already working on your plan for your business, one of the first major decision to make (after the decision to actually do it) is deciding on which business structure works best for you and your business. The two most popular business structures are the corporation (C Corporation and S Corporation) and the LLC (limited liability company); each business structure has pros and cons, depending on your business needs.

Weighing the pros and cons of different business structures, particularly the LLC vs corporation (inc), does not have to be stressful. Think of this as your Spark Notes for business structure pros and cons:

The Notorious I-N-C 

The C-corporation (C-corp) is what most people think of when they hear “corporation” or “inc” - the majority of large companies (Microsoft, Disney, Facebook, Nike) are filed under the C-corp structure because it offers the most asset protection and tax-related options and benefits for some business owners.

Pros

  • Best option for taking a company public/issuing stock

  • More attractive structure for investors

  • Liability protection

  • Possible lower tax rate

Cons

  • Twice the Taxation (your company and your income)

  • Extra paperwork

  • More regulations

The option of choosing a corporation/inc versus an LLC is most attractive for business owners who may want to sell stock and have shareholders. The primary downside is what can feel like a double charge of taxes - first the corporation and then your salary.

The Less Complicated LLC

What is becoming the most popular business structure option for small business owners, the LLC (limited liability company) differs from the INC/corporation in that less paperwork is generally required and owners are spared that extra serving of taxes from the government. The LLC is widely known as a “pass-through” entity because the profits of the company flow directly to the managers/members.

Pros

  • Liability protection

  • Easier Set-up

  • More flexible on taxes

Cons

  • Self-employment taxes

  • Difficulty attracting investors

  • Added formation costs and franchise tax (for some states)

Different from corporations/inc, the LLC does not offer stock to the public. But at the same time, the company still has to keep some of the same types of internal paperwork as the C-corp. Some states may require LLCs to pay franchise taxes (instead of the corporate tax that C-corps pay). LLC business owners may also find some difficulty with.

S-Corp: The Almost Happy Medium

Not quite a corporation or an LLC, the S-Corporation (S-corp) is like an INC-lite: it has shareholders but has chosen to pass on its profits directly to the stockholders. It is taxed differently than an LLC but does not have the double-tax burden of the INC.

Pros

  • Some degree of liability protection

  • Profits pass through the company to shareholders

  • Able to sell stocks

Cons

  • More scrutiny from the IRS

  • All owners must be US citizens

  • Restrictions on ownership (limit of 100 shareholders)

The S-corp is similar to the C-corp in that it provides sizeable asset protection and tax options for business owners and can sell stocks, but also like an LLC with its “pass-through” mentality for company profits. In the debate of INC vs LLC, the S-corp may just be an ideal option for business owners who want the cake and also want to eat it too.  

Swyft can help!

Need to talk to a business professional? We can help you figure out the best business structure for you and your business. Contact us today! 

Originally published on October 29, 2022, and last edited on October 29, 2022.

Frequently Asked Questions

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How much does it cost to form a Corporation or LLC?

Swyft Filings charges only $49 + state filing fees to incorporate your business. Filing fees vary from state to state. If you have a question about a specific state, feel free to email or contact us at 877-777-0450.

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No. For business filings, you paid the total price for your order at the time you placed it. 

However, if you signed up for the Swyft Filings Registered Agent Service, you will be charged for this service when the state grants your company a Certificate of Formation. This recurring fee will be automatically charged to your account for each period the service is active unless you change your Registered Agent with the State or dissolve your company.

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Orders are processed as they are received. However, clients that select Express Processing or Same Day Processing will have their orders processed before Standard Processing orders.

How long does the incorporation process take?

Incorporation times vary from state to state. Feel free to contact us by email or at 877-777-0450 for information on specific state processing times.

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