Monday, May 08, 2006

LLC or Corporation
Alessandro and Reinaldo asked me how Corporation and Incorporation differ from each other. Assuming my knowledge wouldn’t go that far to answer them, I searched for some decent online explanation. Here’s what I found:

What are the main differences between an LLC and an S-corporation?

An LLC has more operating flexibility and less corporate formalities than a S-corporation. For example, an S-corporation cannot have more than 100 stockholders, must hold periodic director's meetings and must hold an annual meeting of stockholders. However, owners of an S-corporation may be subject to less taxes than owners of an LLC.


What is the difference between a corporation and an LLC?

Corporations are formed pursuant to state law and have shareholders, are managed by a board of directors, and the daily affairs are administered by officers. Similarly, a limited liability company (LLC) has members and may be managed by one or more managers. Most often, both entities must pay franchise taxes, but may have different federal tax liabilities.

Generally, most people form corporations or limited liability companies in order to shield the shareholders or members and officers or managers from personal liability for the debts and obligations of the entity. There may also be various tax advantages to forming these entities which may not be available for sole proprietorships and general partnerships.



Reinaldo Schulze said...

Hi guys.... just to complement about Daniel´s explanation, I would like to share this information about the same subject, actually it´s the view around world about "Inc." (Incorporation):

International perspective on incorporation

The legal concept of incorporation is recognized all over the world. In the United States, corporations are identified by the term "incorporated" added after the business name, such as "Texas Instruments, Incorporated", or by putting the word corporation in the name of the company, as in "Netscape Communications Corporation". In Germany, Austria and Switzerland the GmbH ("limited liability business association"), as well as the AG ("stock market traded business association") are the most common comparable concepts. In the United Kingdom the titles Ltd. (abbreviation for limited company) or plc (abbreviation for public limited company) are used for corporations. In France, Spain, Portugal, Poland, the Netherlands and South America the title S.A. is used for corporations. Norway uses the title AS for stock corporations (Norwegian: Aksje Selskap). Italy uses "Srl", or "Società a Responsabilità Limitata" (limited liability company) and "SpA" or "Società Per Azioni" (stock corporation).

And the tip of the day, is this web site: where I´ve search this article ;)

It´s a free web encyclopedia very interesting!!! Enjoy!!

Daniel said...

Very helpful text Reinaldo.
Just to put in a nutshell (para resumir):
LLC in the USA stands for LTDA in Brazil.
What is not cristal clear to me is if S-Corporation would be the equivalent of the brazilian SA (Sociedade Anônima).