What is the difference between a LLC and a Corporation? Why would you choose one over another? Does one have more advantages over the other?
Well your accountant if you have one will tell one what is best for your situation. But I had a tanning/nail salon with my ex wife and we were a s-corp . I have a custom home building business with 2 partners and its an llc. the reason for the llc is we can bascially do what we want with the profits for instance at the end of a job we split up the profit 4 ways and each take a share and put the last share in the bank until the end of the year and either split it up again, leave it in the bank, do a spec home etc… But when you have a corp my accountant said I need to set up a payroll for each week. Well I am not interested in doing that so we go the llc route. They do alot of big builder accounts so setting up payroll for a corp might not be a “must” I dont know but he is very by the book and makes sure we dont get audited so I trust his opinion… hope this helps some???
the main difference is:
corporate stock is an “investment”. as such it is available to satisty your personal judgement creditors. so when you rear end someone, they sue and win, they can be awarded your investments in corporate stock, including tyke, inc. Now they own the company that owns the investment property.
LLC membership is considered personal property by statute. as such it is not available to satisfy judgment creditors. most they can get is a charging order that you can easily frustrate.
both the LLC and corporation protect you personally from liabilities arising within the entity, but only the LLC protects the company from your personal liabilities.
LLC also has fewer administrative hassles (annual meetings, minutes, resolutions, etc) and more flexible taxation choices.
what if a person could get a coporation all ready set up with a line of credit in place to buy and sell real estate ? would this not be a good thing ? i think so as i have a friend who did this and now he has a llc and a coporation and he buys real estate and then sells it or something like this deeds it to the llc and he has all the best of both worlds money for his investting and all is safe 
I think the topic needs a little clarification. I am not an attorney but have a good business education. There are two types of property, real and personal. Real estate is considered real property everything else is considered personal, including corporate stock or the units/shares you might own in an LLC. As such both are assets on your balance sheet and hence vulnerable to claim in a personal lawsuit.
Corps and LLC’s create a veil between your business activities and your personal activities. If someone sues your corp or llc all they can get are the assets of that business and not your personal assets. If someone sues you personally they may very well acquire your interest in the corp stock or units of the llc should they prevail.
Corps are more formal requiring a board of directors, officers, annual meetings and such. LLC’s are less formal requiring little or none of the above. LLC’s are known as pass thru entities meaning the financial performance is passed through to the owners and net income is taxed at your personal income tax rate. Corps are taxed as seperate entities at the corporate tax rate. Personal marginal tax rates start at 10% while corps start at 15%, but personal rates increase much more quickly than corp rates. For instance the first $50,000 of corp net income is taxed at 15%, by the time you reach this amount of personal income you are being taxed at a marginal rate of 25%.
There are about two ways to extract money out of a corporation, through salary or as dividends. If you take it as salary then you report that on your personal income tax return and pay tax on it. If you take it as dividends then you are paying taxes twice, first at the corp rate then at the personal rate on your individual tax return. Also note that if you form an LLC and it makes $100,000 in the first year but you leave the money in the company taking no salary or dividend the net earnings still pass thru to your personal tax return and you owe taxes on that money.
Then there is the S-corp which I won’t get into here. For most of your purposes here an LLC or S-corp is probably most logical. Just my two cents.
i AM a cpa, and you are incorrect.
Member interest in an LLC (personal property) cannot be awarded to satisfy a judgement creditor. period. The Texas LLC Act, and the other states I have read, is explicit on this point.
your tax advice is poor and you should avoid making any unless you know what you’re talking about.
corporations may be taxed as seperate entities OR as passthrough entities (S-corp)
LLCs may be taxed as sole proprietorship, partnership, C-corp or S-corp, depending on your personal tax preferences, objectives and number of members. there is no tax law for “LLC” so you get to tell the IRS how you choose to tax your LLC, either under personal or corporate tax law.
mcwagner:
Congratulations on your CPA. I am not familiar with Texas law regarding LLC member interests so I will defer to your knowledge. While you expanded on my earlier comments with very good detail I do not believe any of my statements regarding Corps and LLC’s is incorrect and I would not charachterize my comments as tax advice. I simply stated factual information. While I did not discuss S-Corps or the variety of taxation choices available to the LLC member I did accurately cover the basics differences between a C-Corp and an LLC. Thanks again for your contribution I’m sure the readership will enjoy the opinions.
was wondering with the ed. he has would he say llc or coporation? and why ? as i said befor i have a friend who has both and he just moves things he buys and keeps from one to the other
LLC all the way. it is simply a stronger form, as stated above.
you can tax it in whatever way makes the most sense for what you are trying to accomplish.
thank you