Each state has different requirements to fulfill in order to create an LLC. First, a name must be given to the LLC. The name must not match the name of another LLC in the state of organization, and has to exclude the word “corporation.” Additionally, your state will inform you of the prohibited words for your LLC’s name. Next, the formal paperwork must be filed along with the necessary filing fees with a state’s governing entity. Most of the time the formation of new companies and corporations are under the jurisdiction of the state’s Secretary of State, however, you must check ahead of time before submitting your paperwork. The owners of an LLC will need to put together Articles of Organization in order to officially form their Limited Liability Company. The Articles of Organization are also named the Certificate of Formation or the Certificate of Organization in some states. After writing the Articles of Organization, a LLC Operating Agreement will need to be written up. This document sets out the rights and responsibilities of all the members of the Limited Liability Company. The final steps are to publish your notice of intent to form an LLC, and to obtain the necessary licensing for the state in which you are organizing your company.

Forming a corporation is similar to creating a Limited Liability Company, except for some documentation due to the difference in its structure. A corporation needs a name that does not match an existing corporation’s name in the state of incorporation. Next, the Articles of Incorporation (also called a Charter or Certificate of Incorporation) will need to be filed with the state’s corporate oversight body. Corporate bylaws will need to be written, which sets the guidelines for how the corporation will be run on a day-to-day basis.

A corporation is created as a C-Corporation by default. In order for a C-Corporation to change its classification into an S-Corporation, it must file a Form 2553 with the Internal Revenue Service. An S-Corporation is deemed as such for taxation purposes only, and has several requirements that it must meet in order to be classified as such. For example, only corporations with less than 100 shareholders are permitted to be classified as an S-Corporation.

An LLC has a more difficult time obtaining financing than does a corporation. This is because an LLC is a relatively new business structure, and it is less understood than a C or S Corporation.  Additionally, a corporation issues shares as opposed to membership interests like an LLC. Shares are easily convertible to dollar amounts which can be used to represent collateral when applying for business credit.
 
The biggest difference when obtaining business financing is in the manner in which an LLC is treated compared to a corporation. A corporation is able to be looked at as a single entity, with its credit-worthiness looked at on a single credit report. With a Limited Liability Company, each member must be evaluated individually, which forces the members to personally guarantee debts. Having to personally guarantee debts eliminates the advantage of an LLC which is “limited liability.”