Incorporate (Inc.) and LLC (Limited Liability Company). Both are significant, yet it has different features. Which of these three letters should you incorporate in your business name and why? This question will be answered through the discussion in this article with regards to the similarities, differences, and the advantages of incorporating and forming an LLC.

To decide whether you need to incorporate or form an LLC, let us first look on the similarities and differences of these two types of business structure.

The major similarities between LLCs and incorporation are as follows:

1. Both LLCs and Incorporation are legal entities are created by means of filing within the state on which has jurisdiction over the business.
2. Both LLCs and Incorporation have the limited liability feature which helps to protect the personal assets of its owners from any business liabilities or obligations.
3. Both LLCs and Incorporation have only some ownership limitations.

The major differences between incorporations and LLCs are as follows:

1. Incorporations are issuing stocks and the shares are owned through stocks. On the other hand, an LLC does not make use stocks for its ownership. It is simply owned by the individuals and/or managers of the company who have invested in the company.

2. Incorporations are required by state laws to hold annual shareholders or board of director meetings and keeps records of the minutes and the proceedings of the said minutes. On the other hand, an LLC does not required by state laws of such meetings, thus resulting to in less official paperwork.

3. Incorporation is considered to be a taxable entity. In other words, it must pay taxes based both on the profits of the shareholders and of the corporate income. On the other hand, an LLC possesses a pass-through a tax entity. In other words, the profit or loss of the LLC will only be reflected on the personal income tax declaration of the owners. It results in avoiding the double taxation scheme on the corporate income and income on the distributions of profits among its owners.

The major advantages of an LLC are as follows:

1. LLC provides its owners liability protection in case the company runs into debt. In other words, your company's debtors will run after your company's assets, not your personal possessions. You will only lose what you have invested in the company.

2. LLCs are not subjected to double taxation. As mentioned earlier, an LLC is only taxed based on the individual share of profits that will be reflected on the individual owner's personal income tax declaration. The income of LLC itself is not taxable.

3. In addition, all profits and losses pass through to the owners and included in their individual personal tax declaration.

4. Running an LLC involves a less complicated paper works with no formal meetings required.

5. LLCs have the most flexible organizational structure compared to any other business framework. There are fewer rules with regards on the qualification of being an LLC member.

The major advantages of incorporations are as follows:

1. Both S and C Corporations can go public. That is, they can work with venture capital firms for additional capital infusion.

2. An S Corporation is not subjected to double taxation.

3. Although a C Corporation can be double taxed mainly because of its stability, it has incentive stock option plan.

There you have it, things that you can use to compare whether you will incorporate or form an LLC. Just remember to keep your options open and keep in mind two important goals: stability and personal protection.