A corporation and a limited liability company both offer personal liability protection.

Generally, LLCs are referred to as Limited Liability Companies. LLCs are a type of business entity which is regulated by state law. They combine the advantages of a Corporation with those of a Sole Proprietorship or Partnership. They combine the best of both worlds. Corporations and starting a Colorado LLC both provide personal liability protection. It provides a “wall of protection” between your assets and your business assets.

If your company is sued, it prevents you from using your personal assets to pay off your business debts or liabilities. LLCs, sole proprietorships, and partnerships enjoy the second benefit, pass-through taxation. You avoid the disadvantage Corporations face: double taxation by having your business profits/losses reflected on your tax return instead of being taxed separately while starting a Colorado LLC. You will avoid double taxation by doing this. Essentially, double taxation occurs when you pay taxes on both the corporate and personal levels.

Corporations are separate legal entities that can act on behalf of their owners, just like LLCs. They can conduct business, earn money, own personal and real property, etc. Unlike Corporations, there is no separate legal entity formed. The owner runs sole Proprietorships. They are known as Shareholders or Stakeholders. According to the law, the owner is the business itself. Partnerships are unincorporated businesses run by more than one person.

Like a Sole Proprietorship, they do not create a separate legal entity. In contrast to a corporation, creating and maintaining an LLC does not cost much money. Colorado Secretary of State charges $50 as a one-time filing fee for an LLC and $10 yearly for the Periodic Report. In addition to being less costly than maintaining a corporation, maintaining an LLC is also less expensive. The corporation’s profits are taxed twice since they are taxed at the corporate and shareholder levels.

LLCs are pass-through entities, which means that profits are taxed at the same rate as your income rather than at the corporate level. LLCs don’t pay taxes at the corporate level with the IRS. Having no upside means a corporation doesn’t have any upside. Tech companies, startups, and companies that need funding from outside investors are better off with these forms of finance.

They are just more complex to maintain. As a result of an LLC, your assets are protected from your business assets. Your assets are protected and safe if your company gets sued. Only your company’s assets can be used to repay the company’s debts. A sole proprietorship does not offer this protection. You can use your assets if your business is sued since the law views you and your business similarly.