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Differences between an LLC and a Corporation

Differences between an LLC and a Corporation

Two of the most popular forms of business entities in South Carolina now are the corporation and the Limited Liability Company or LLC. There are some fundamental differences between then: and one of the most important decisions anyone starting a business makes is the choice of entity formation.

Under South Carolina law a corporation is considered a separate legal person. It is a different entity from its owners (called shareholders) and management. Profits are usually taxed twice: once at the corporate level and then when received in the form of dividends or other distributions by the shareholders (some corporations will qualify for different tax structures but always subject to approval by the IRS after an audit). Moving property or equipment into or out of the company name may be considered a taxable transaction.  A corporation provides significant protection to its shareholders personal assets against lawsuits and business debts. Corporations can only be formed in South Carolina by the use of a licensed attorney.

A Limited Liability Company is not considered a separate person although it does generally have the same protection against lawsuits and debts as provided by a corporation. Company profits are only taxed against the owners, as the company isn't a completely sperate entity. Both corporate and LLC formation is done through filings made by the South Carolina Secretary of State.

Most small and start up businesses in South Carolina will be best suited to form as an LLC. Companies which are going to be larger, or have certain employee\owner benefit and salary packages may be better suited to form as a corporation. The choice might be guided by tax law: and it is important for anyone starting a business to develop a relationship with a good tax attorney. If you would like to form an LLC or corporation we are able to help and can recommend a tax attorney as necessary to make sure that you form the best entity for your business.


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