Many factors have to be considered before I suggest you any opinion on these two. But first of all, we have to know the basic difference between An LLC and A Corporation and list out there for and against.
What is an LLC?
An LLC is an abbreviated form for a Limited Liability Company. As the name suggests, LLC sunders your assets from your business assets. So in any worst-case scenario if you suffer some loss in your business and get under debt then only the money that you have invested in your business will be used to pay off and your assets like your home, your vehicles, and other personal estates or assets will remain sound.
What is a Corporation?
It’s a legal organization that is completely discrete from you if you are one of its owners. To form a corporation you need other members, as you can not be the individual owner, and these owners or members, along with you, will be the common shareholders. One good aspect of forming a corporation is that you or any of its members will not be personally at fault for any of its loss or debts. And on the other hand, the shareholders will have access to dividends and stock inflation.
LLC Vs Corporation
There are significant differences between LLCs and Corporations, and I will be going to discuss some of those in-depth and others, that are not much important for trucking businesses, with just an overview.
Aspects of ownership in LLC and Corporation
Ownership is one of the most important things in a business, largely if I talk about trucking businesses. This one aspect can either smooth out your business or severely entangle it. Well in LLCs the owner have the liberty to give out the profit shares among its members, regardless of the financial endowment of the members to the company. So, this adds an advantage while organizing the company’s ownership.
In the case of forming a corporation, there is no individual owner but shareholders of the company. And gains and losses of the company are dispensed equally among its members. Hence there is no single sheep to be butchered when the company faces any losses.
Different Taxations for LLCs and Corporations
In the trucking business, there are a lot of expenses to deal with like permits, truck maintenance, and many more. So, what kind of taxes you are going to pay plays a key role in making profits.
I’ll be honest that when it comes to filing taxes, LLCs taxation is easier than Corporation taxation. But there are different tax advantages that these two provide.
I am estimating that many of you are unknown to the technical terms of taxation, plus it would be a lot of hassle for you to go through all those technicalities. So, I am going to cut the jargon and describe it in Lehman’s terms.
When it comes to taxation in LLCs, the profits directly go to the owner or owners, in case you have many members, and gains and losses are not announced on business levels but individual tax returns.
On the other hand, in corporations, there is a concept called Double jeopardy. Because corporate are treated as individual legal entities, they pay taxes at many levels such as taxes on profits, corporate tax, and they also pay taxes on dividends they share with the shareholders. Along with that, dividends are taxed twice, as they are not tax-deduct able like bonuses and salaries. And this leads to Double jeopardy.
Legal entity and Tax entity?
As I am taking you through taxation, legal entity and Tax entity is another widely asked query. So what’s the difference between a legal entity and a tax entity? How IRS looks at your business is termed as a Tax entity, and accordingly, you are taxed by IRS. In other words, when you are an LLC, registered under your State, you won’t be taxed by IRS as they don’t recognize the same. And for taxation, you might get considered as an s-corporation, c-corporation, or sole-proprietor. All and all, Legal entities are ordered with your state, and Tax entities are ordered with IRS. But to get an Employer Identification Number(EIN), you need to individually register your taxation structure to the IRS.
I think I have made enough suggestions, for you, to end the dilemma of choosing between an LLC or a corporation. And if I suggest you, it solely depends upon the size of your trucking company and your organizing capacity that will help you choose between an LLC or a corporation. Although, a corporation requires a lot of staff, annual meetings, big taxation, and other things.
In case you are not satisfied with my suggestions, given above, I would recommend you visit our website Global Multi Services.
As we have a highly experienced team of experts who would be more than happy to help you in resolving all your queries and they will also mitigate for you the trouble of filling the paperwork of the same.