While there are various forms of businesses, LLC’s (Limited Liability Companies) and INC’s (Incorporations) are legal methods to charter businesses that somewhat spate the liabilities from the owner or owners. In a sole proprietorship or a partnership, generally the owners are responsible for all liability for a company; of course they stand to gain the most rewards.
When you incorporate a business or file a business as an LLC, the business itself, to a certain degree, becomes a separate entity. It even gets its own form of a Social Security Number, like a newborn, called an EIN (Employer Identification Number) and can start its own lines of credit. But there are differences between INC’s and LLC’s.
The management structure in an LLC can be much looser, with one leader or many, much like a sole proprietorship or a partnership. A Corporation, on the other hand, must have a formalized management structure with a Board of Directors and designated officers. Shareholders are the owners, and while shareholders can be managers, shareholders in general are separated from managing the company except for on major voted on decisions. Public corporations must have monthly recorded meanings while LLC’s do not.
While most major corporate laws and guidelines are federal, actual filing rules and certain laws are governed by each state, especially in regards to state taxation. LLC’s are relatively new legal entities and regulations and protection under the law varies from state to state. Corporate tax structures are very rigid, with a corporate tax and dividend tax on corporations. LLC’s have various options in regards to how they file taxes.
Most companies that want to go public file as a S corporation or another INC, as you can then sell stock once you meet certain stipulations, and then most anyone can become a shareholder by buying stock over an exchange, like the Dow or the NASDAQ or the S&P 500. LLC’s can go public and sell partnerships but they cannot sell stock over an exchange.