Start your corporation on the right path

Both protect owners so they’re not personally on the hook for business liabilities or debts. One key difference is how they’re owned. The owners of LLCs are called members, and their ownership is divided into membership interests. Corporations have shareholders, and their ownership is divided into shares, which are units of stock.

Another difference is how they’re maintained. Corporations generally have more formal record-keeping and reporting requirements, less management flexibility, and require a board of directors. Even though LLCs are considered easier to start and maintain, investors tend to prefer corporations.

It ensures that you and other shareholders aren't personally on the hook for company debts and liabilities.

It helps make sure that you and other shareholders aren't personally on the hook for company debts and liabilities.

Articles of incorporation are a requirement for forming a corporation. They comprise a formal document that establishes the corporation as a separate business entity.

The articles become a public record and provide important information about the corporation, including its name, contact information, and information about its shares of stock. The exact information that the articles need to include vary by state.

Think of shares as your piece of the ownership pie—and there are two main types (i.e. "common" and "preferred").

Common shareholders have voting rights and can receive dividends if they're issued. Preferred shareholders have priority over common shareholders when it comes to dividends and payout claims (if the corporation becomes insolvent).

You need majority shareholder consent to switch before you can change your status with the IRS.