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J.Hazelbaker, Attorney
Category: Business Law
Satisfied Customers: 4385
Experience:  Experienced and trained in the area of business law.
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Resolved Question:

Submitted: 8 years ago.
Category: Business Law
Expert:  J.Hazelbaker replied 8 years ago.
The biggest difference is that LLC's were created to cover situations where there would be limited numbers of owners, so that formation and operational complexities could be reduced.

LLC's were created primarily to provide a legal entity for those who were operating as a sole proprietorship or with few owners, but where undertaking the formalities of forming a corporation were not desired. Thus, the LLC form is geared toward situation where there is a single or very few principals involved.

Corporations, on the other hand, are geared to provide opportunities for greatly expanded ownership. There are significant processes that must be followed, however, to realize that potential. This creates complexity that, while beneficial where raising capital from investors is important, adds to the costs necessary and sophistication needed to properly manage the corporation.

Both legal forms provided liability protection. An S corp and LLC also provide the tax benefits of a pass through entity for tax purposes (taxed at the individual not corporate level). The primary difference is the process of forming and subsequent documentation that is needed to operate, with S Corp being more onerous.

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