LLC vs Corporation Comparison in Georgia

LLC vs. Corporation: What’s the Difference?

LLC (Limited Liability Company)

Pros:

Flexibility in Management – No board of directors required; members can manage directly or appoint managers.

Pass-Through Taxation – Profits/losses usually pass through to members' personal tax returns (no double taxation).

Fewer Formalities – Less paperwork and ongoing compliance compared to corporations.

Customizable Structure – Operating agreement tailors how profits are shared, voting is handled, etc.

Cons:

Self-Employment Tax – Members must pay self-employment taxes on profits unless the LLC elects to be taxed as an S Corp.

Perception – May seem less “formal” or “established” to investors compared to a corporation.

Corporation (C-Corp or S-Corp)

Pros:

Ideal for Investors – Clear share structure and formal governance appeal to outside investors.

Limited Liability – Shareholders are typically protected from business debts and liabilities.

Tax Options:

C-Corp: Separate tax entity; can retain earnings.

S-Corp: Pass-through taxation (like LLC), but avoids self-employment tax on some income.

Cons:

Formalities Required – Must hold annual meetings, maintain bylaws, and keep detailed records.

Double Taxation (C-Corp) – Profits taxed at corporate level and again on shareholder dividends.

Ownership Restrictions (S-Corp) – Limited to 100 shareholders; all must be U.S. individuals or qualifying trusts/estates.

Which One Is Right for You?

LLC is best for: small businesses, family-owned operations, real estate investors, and freelancers seeking simplicity and flexibility.

Corporation (S or C) is better for: businesses seeking outside investment, startups planning to issue shares, or those with high earnings looking to reinvest profits.