William D King: What is the difference between a corporation and a limited liability company?

Here is the difference between a corporation and a limited liability company:

• A corporation, or C Corporation, is an independent legal entity that is created when it incorporates. The owners are called shareholders. Shares issued by the corporation are owned by its shareholders, and each shareholder owns a fractional interest in the business. The corporation has rights, powers and obligations which are distinct from those of its shareholders. It can acquire rights and incur liabilities in its own name. A limited liability company (LLC), on the other hand, does not have separate legal status from its members; all members are personally liable for the debts of the LLC to the extent of their investment in the LLC. Also, members must be permitted under state law to organize themselves into an LLC without having to obtain approval from any authority to do so.
• An LLC is generally viewed as a hybrid between a corporation and partnership. An LLC has the flexibility of a partnership with limited liability protection like that of a corporation. The rules regarding limited liability companies vary from state to state, but most states’ laws provide that members or managers (if applicable) are not personally liable for debts if limited liability company agreements are in place. One of the main advantages of an LLC over other business structures is its tax treatment; double taxation does not occur unless there is profit distribution to the members/managers. Furthermore, income taxes are paid by the individual members on their respective shares instead of at the entity level says William D King.
• Under federal law, an LLC may be taxed in one of three ways: (1) the LLC may be treated as a “disregarded entity” and taxed accordingly if it is a single-member LLC; (2) the LLC may be taxed as a corporation, if it has at least two members; or (3) it can elect to be taxed under Subchapter K of the Internal Revenue Code. If an election is made, the company will pay all its tax on a calendar year basis at the individual level in much the same way that a partnership would. This is called pass through taxation, since no entity-level tax is paid by the owners/members.
• An important difference between an LLC and a corporation concerns management structure. In general, corporations have rigid structures where shareholders generally cannot interfere with day-to-day management of the business. In a corporation, shareholders elect a board of directors who hires officers to run the company on a daily basis. In an LLC, by contrast, management is generally flexible and is decided upon according to the wishes of its members or managers. While some states allow for one person LLCs, many require that there be at least two members involved in order to avoid liability problems that may arise from having just one owner. It is important to note that a single member LLC does not have limited liability protection unless it adopts different tax treatment as discussed above under “LLC”.
• An LLC can either be member-managed or manager-managed. In a member-managed LLC, all owners/members make decisions about the company by coming to an agreement. In a manager-managed LLC, there are managers in addition to the owners/members who have authority over specific areas of the business and whose actions bind the owners/members in their respective capacities.
• In most states, a person interested in forming an LLC needs to file Articles of Organization with state authorities. A corporation must also file Articles of Incorporation with its Secretary of State or similar department when it incorporates. For both kinds of entities, these documents generally contain basic information such as name and address, principals involved with the entity, agent for service of process (generally your resident agent), duration if not perpetual and whether member votes are required for major decisions 

Conclusion by William D King:

The form of business entity you choose to run your business is a critical decision that must be made carefully. A knowledgeable attorney can help guide you through the process and ensure that your choice of entity is properly documented and filed with the appropriate state agency. In general, an LLC provides flexibility for its members while also limiting their liability from actions undertaken by the company itself.