Organization

• One of the major differences between corporations and limited liability companies is in their organizations. Though an LLC can be organized very much like a corporation, it has very few organizational requirements. Essentially, the relationship among the owners of an LLC is a sort of contract, so it's very flexible. A corporation, on the other hand, has formal organizational requirements that include corporate officers, a board of directors, annual meetings and a host of internal documents. The owners of an LLC can choose whether to run the business themselves or hire separate managers to oversee operations.
  
  

Limited Liability

• The term limited liability refers to the legal distinction between a business and its owners. Legally, a sole proprietor's assets are not really different from those of the business since the owner can be liable for businesses debts. Corporations, on the other hand, through what is known as the corporate veil, protect owners (shareholders) from the debts of the business. This limited liability feature is the most important aspect of corporations borrowed by the LLC. However, to distinguish between the owners of an LLC and the owners of a corporation, the former are known as members rather than shareholders.
  
  

Piercing the Veil

• Despite limited liability protections, the corporate veil can be pierced and the owners of a business held responsible for the business's debts. This usually only occurs if certain conditions are present, such as if the corporation is woefully undercapitalized to meet reasonable costs of business or if the formalities of meetings and separate record keeping is not maintained. In theory, the limited liability protections of an LLC can be pierced in the same way, but courts have not fully tested this idea. Because the LLC has fewer formal obligations for its management structure, failure to maintain the formalities of meetings and minutes will probably not be a factor for piercing the veil if the requirements of the company's articles of organization are met.
  
  

Taxation

• Another major advantage of the LLC is in taxation. A corporation, by definition, is a separate entity from its owners. Its owners are thus subject to a sort of double taxation; once for profits of the business and a second time when profits are distributed to shareholders. An LLC is taxed like a partnership. That is, the members are taxed individually on the business's profits or losses. Usually, each member has a predetermined percentage ownership in the business and receives a corresponding share of the profits (or losses), though these can be allocated in a variety of ways. Ultimately, the profits of the business are only taxed once, at the members' individual tax rate.
  
  

Advantages of Corporation

• There are still some advantages to the corporate structure, of course, or it wouldn't be nearly so popular. Probably the most important is the ability to raise capital. It's impractical for an LLC to issue shares of stock or other forms of equity for tens or hundreds of millions of dollars as publicly traded corporations do while still maintaining meaningful control of the business. In other words, the corporation structure is much better suited to very large businesses, whereas the LLC only makes sense for much smaller operations. Usually, the death or retirement of an LLC member can result in the end of the business. As many of the world's largest corporations, like Disney or McDonald's have proven, the corporate structure can exist in perpetuity long after their founders perish. Corporations also receive some beneficial tax treatment in the form of credits and deductions for providing certain services to employees or engaging in particular activities.