What is best for a home business a llc or inc?

Answer 1

Like a Corporation, an LLC offers limited liability to its owners. Unlike a Corporation, however, an LLC is taxed as a Partnership or Sole Proprietorship (unless the LLC elects to be taxed as a Corporation). This allows an LLC to pass all its income and losses through to the owners. Furthermore, the LLC has an advantage over a C-Corporation which makes an S-Corporation tax election because the S-Corporation can only have 100 stockholders and the stockholders cannot be Corporations or non-U.S.

Answer 2

There are many factors to consider. The best choice often turns on what is most important to the individual. An LLC is simpler in that the LLC statutes do not require LLCs to hold annual meetings, have a board of directors, elect officers or follow some other corporate formalities.

An LLC with a single member has the added feature of being a "disregarded entity" which means that the member simply files his or her taxes as if the LLC were a sole proprietorship. That means that the single-member LLC doesn't need to file its own tax return, unlike a corporation. The major drawbacks of a typical LLC are: * Earnings of most members of an LLC are generally subject to self employment tax. In a corporation electing S corporation treatment, some portion of the earnings may be a dividend, and not subject to the self employment tax. * A limited liability company cannot take advantage of incentive stock options, engage in tax-free reorganizations, or issue Section 1244 stock. * A few states charge fees that are higher for LLCs than for corporations.

Answer 3

Neither an LLC or a corporation is "better." They both have advantages and disadvantages. The both have features that work better in particular situations.

Typically, an LLC structure is more flexible than a corporation and, unlike a regular corporation, all of the income and loss of the LLC is passed through to the owners (called 'members' in an LLC).

Both types of entities have limited liability and therefore protect, at least to some extent, the assets of the owners from the creditors of the business.

In most states, the filing fees for organizing a corporation and an LLC are roughly the same, though in a few states (notably Illinois) the cost of creating an LLC is substantially higher.

Answer 4

An "inc" is a corporation, while an LLC is a limited Liability Company.

There are a number of differences between the two - mostly on how they are operated and profit is shared among owners.

With a corporation, profit is shared according to the number of shares held by the shareholders. As well, ownership and control is delegated by the shareholders of the company electing a board of directors to make decisions on their behalf.

With an LLC, the ownership and profit sharing structure is dictated by the operating agreement of the LLC. This can mean that it can be a bit more "creative" when it comes to how ownership and profit is shared.

With taxes, a corporation is taxed according to corporate tax laws, while an LLC is taxed either as a partnership, S corp, or C Corp depending on how the owners want to run their business.

Answer 5

It would depend on the level of personal asset protection you want/need, if you will have employees and how you want to be taxed. This explanation of each business type is from the Indiana State website for small business guidance. http://www.in.gov/sos/business/corps/guide.html

* Corporation: A legal entity which is created by filing Articles of Incorporation. The Corporation itself assumes all liabilities and debts of the Corporation. A corporation is owned by shareholders. A shareholder enjoys protection from the corporation's debts and liabilities. TAX: Income is taxed twice: 1) at the corporate level; and 2) at the employee level when a wage is paid or at the shareholder level when distributed as a dividend.

* S-Corporation: After filing Articles of Incorporation, a Corporation may seek to obtain S Corporation status for federal income tax purposes. The income of an S Corporation is taxed only once: at the employee or shareholder level. To qualify, the corporation may not have more than 75 shareholders and must meet other certain Internal Revenue Service criteria. The corporation must submit IRS Form #2553 to the IRS. An S-Corporation is considered a corporation in all other respects and is subject to no additional or special filing requirements with the Secretary of State. * Limited Liability Company: An LLC is a formal association which combines the advantage of a corporation's limited liability and the flexibility and single taxation of a general partnership. An LLC has members rather than shareholders. A member enjoys protections from the liabilities and debts of the LLC. Although not required by law, an LLC should operate under an Operating Agreement which is like a Partnership Agreement. TAX: If the LLC qualifies under IRS guidelines, it may be taxed only once, like a partnership, at the employee or member level, while not having the same restrictions as an S-Corporation.

Answer 6

An INC. is treated as a 'living entity' with the most significant difference between and LLC and an INC. being the tax treatment of the company's profit or loss.

In an LLC, the company's profit/loss are passed through to the individual members and taxed at the personal income tax rate (federal taxes ... your state may also levy state income tax) whereas a corporation's profit/loss are taxed (at the federal level) at the corporate tax rate.

There may be differences in liabilities to the members of an LLC but this will depend upon the Articles of Organization.