What is the difference between a corporation and a limited liability company (LLC)?
The main difference between a corporation and a limited liability company (LLC) in Texas is the amount of protection the business owner has from personal liability. A corporation is a business structure that is legally recognized as a separate entity from its owners, so the owner is not personally liable for the company’s debts or liabilities. An LLC, on the other hand, provides its owners with limited liability protection and a certain degree of flexibility with respect to ownership and taxation. In terms of ownership, a corporation typically must issue shares of stock and the owners are shareholders. On the other hand, an LLC does not issue shares of stock and the owners of the LLC are members. Additionally, corporations are almost always required to hold annual meetings and may have more formal recordkeeping requirements. LLCs are not required to hold annual meetings, but may opt to do so, and recordkeeping requirements are usually less stringent. Taxes are handled differently between a corporation and an LLC. Corporations typically have two levels of tax, where the profits are taxed at the corporate level and then potentially taxed again when distributed to shareholders. LLCs are only taxed once at the owner level when profits are distributed as income to the members. Overall, a corporation and an LLC both offer varying degrees of protection and advantages to businesses; therefore, choosing the right business structure should be based on individual needs and circumstances.
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