How are corporations taxed differently than LLCs?

Corporations and LLCs are taxed differently because they are separate business structures recognized by the IRS.

Corporations are considered separate legal entities from their owners and are taxed as such. This means that corporations are subject to corporate income tax on their profits. In addition, if the corporation distributes profits to its shareholders in the form of dividends, the dividends may be subject to double taxation. This is because the corporation pays tax on its profits at the corporate level, and then the shareholders pay tax on the dividends they receive on their personal tax returns.

LLCs, on the other hand, are not taxed as separate entities. Instead, the profits and losses of the LLC are "passed through" to the individual owners, who report their share of the profits and losses on their personal tax returns. This means that the LLC itself is not subject to corporate income tax, but the individual owners may have to pay tax on their share of the profits at their personal income tax rate.

It's worth noting that there are different types of corporations, including "S corporations" and "C corporations," which can be taxed differently. And LLCs can also choose to be taxed as corporations if they wish. It's important to consult with a tax professional or an attorney to determine the best business structure for your specific situation.