Is An LLC A Corporation? Key Differences (2026)

Is an LLC a Corporation?

An LLC is not a corporation. Although the term “corporation” is sometimes used to refer to any generic business, it actually denotes a particular entity type. More to the point, LLCs and corporations are distinct entity types created under different sets of laws.

How LLCs and Corporations Are Alike

LLCs and corporations can be created by one or more business owners. These legal entities are both considered separate from their owners. In fact, one of the most valuable benefits of an LLC or a corporation is to help protect your personal assets from company liabilities and debts.

Ownership Differences Between the Two

A notable difference between an LLC vs. corporation is ownership. LLCs are owned by members. Each member has a membership share, and those shares do not need to be equal.

Generally, LLCs have no outstanding membership shares, though. If the members want to add someone, they must create a new membership share or transfer part or all of an existing membership share to the new member.

Corporations are owned by shareholders. Corporations typically have outstanding shares to raise capital from new or existing investors. Shareholders can sell their shares, subject to any restrictions imposed by the corporation.

How Each Structure Is Taxed

Both corporations and LLCs have the flexibility to elect either pass-through taxation or corporate taxation.

LLC taxes are usually pass-through, although you can elect corporate taxation. When a corporation elects pass-through taxation, it is an S-corporation (S-corp). When a corporation elects corporate taxation, it is a C-corporation (C-corp).

Management and Formality Requirements

Members handle an LLC’s day-to-day operations in a member-managed LLC. Alternatively, a manager-managed LLC is overseen by an appointed manager. Managers don’t have to be members.

A board of directors manages a corporation. Additionally, officers handle day-to-day operational management. Directors and officers don’t need to be shareholders.

LLCs usually have lower formal burdens than corporations. For example, corporations often must hold annual meetings and file an annual report.

Formation and Filing Requirements

Corporations are formed by filing articles of incorporation with the state and paying a fee. Most states require corporations to adopt bylaws to govern their operation. However, corporations usually don’t need to file the bylaws.

LLCs are formed by filing articles of formation or organization, depending on the state, and paying a filing fee. The filing fees are often comparable to corporate filing fees. For example, Delaware currently charges $110 to form an LLC and $109 to incorporate a corporation. In most states, an LLC operating agreement is optional.

Which Structure to Choose

Small, closely held businesses can benefit from the pass-through taxation of LLCs and S-corps. Businesses that plan to add investors might appreciate a corporation’s ease of selling outstanding shares. Consider discussing your business’s needs with a lawyer to determine which structure meets them best.