Businesses form corporations and limited liability companies so their owners can limit their legal responsibility for debts to their investments or contributions. Shareholders and LLC members share their company's profits, property and losses. They possess different rights and responsibilities, though, and are taxed differently. These differences reflect the fact that LLCs generally are structured and operated more like partnerships than corporations.


A person may not run a corporation merely by owning its stock; shareholders elect directors, who manage corporations. Shareholders lack authority to bind the corporation to contracts or otherwise act in its name. An owner can manage and act for an LLC if the LLC chooses to have its members run the company; such an LLC resembles a partnership, or association of persons operating a business for profit. If the LLC uses non-members to manage, the members have no such authority and the LLC is operated similar to a corporation.

Fiduciary Duties

Shareholders, unless they are also officers or directors, owe no duty of loyalty to the corporation; they can conduct business with the corporation as can any other person. A member who manages an LLC must not put his own interests above that of the company. Members who act as the LLC's fiduciaries may not conduct their own business with the LLC or compete with it, unless the other members are fully informed about the transaction and its terms are fair to the LLC and its members. Arizona permits members to do business with LLC so long as the members to not violate their fiduciary duties, if they have any, as of publication.

Transfer of Ownership Interests

Unless restricted by an agreement, a shareholder does not need the corporation or other shareholders' permission to sell or give away stock to anyone. In the absence of an operating agreement provision, the members of an LLC must unanimously approve the admission of new members; therefore, the transfer of LLC ownership interests is not permitted unless all the current members agree. Ownership interests in both professional corporations, or PCs, and professional limited liability companies, or PLLCs, cannot be transferred to persons not licensed to practice the profession for which the PC or PLLC was formed.


Corporations with more than 100 shareholders experience the double-taxation of profits. The corporation gets taxed when it earns profits, while the shareholder pays taxes on the profits distributed by the corporation. If a corporation has no more than 100 shareholders, it can elect to become an "S" corporation so that the profits and losses pass through the corporation to the shareholders. Unless the LLC is automatically treated by the Internal Revenue Service as a corporation, only the members pay taxes on profits if the LLC chooses to be treated as a partnership or if the LLC has only one member.

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