What are the differences between a corporation and an LLC?

A corporation and an LLC, or limited liability company, are two distinct business structures, each with different benefits and drawbacks. In Maryland, a corporation is a legal entity that is separate from its owners. A corporation has shareholders who own the company, a board of directors who oversee the company, and officers who manage the company. Corporations are subject to double taxation, which means that the profits of the corporation are taxed at both the corporate level and the shareholder level. An LLC is also a separate legal entity from its owners, but it is not taxed as a corporation. Instead, the profits and losses of the LLC “pass through” to the owners who report them on their individual tax returns. LLCs usually have fewer formalities than corporations, such as more relaxed record-keeping requirements and fewer regulations in terms of how the company is run. Both types of business structures provide asset protection. Corporations have limited liability, meaning the personal assets of the shareholders are not at risk if the company experiences losses or files for bankruptcy. An LLC can offer limited liability to its members, and, in some cases, provide added protection by limiting the members’ liability for debts and obligations of the LLC. Overall, the main difference between a corporation and an LLC is the way they are taxed, and the type of asset protection they provide. It’s important to weigh the pros and cons of each to decide which type of business structure is best suited for your specific business needs.

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