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Related Articles

What are the Main Differences between an LLC and an S-Corp?

What Is a C-Corporation?

What Is an LLC?

What Is an S-Corp?

Which Type of Company Incorporation is Right for You?

 

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What are the Main Differences between an LLC and an S-Corp?

Perhaps you've already decided to shift out of sole proprietorship or general partnership status. Friends, acquaintances or (bitter?) experience itself might have alerted you to the personal financial risks of sole proprietor or partnership status in business. Advice might come from all directions: From well-meaning friends, acquaintances, other business owners, even relatives...with no business background! The limited liability corporation, or LLC, and the S-corp status may have been suggested to you by one or more interested parties. Thoroughly evaluating the pluses and minuses of the two types of structure is critical to making an intelligent decision.

So what are the main differences between an LLC and an S-Corp?

First of all, both structures are designed to limit personal liability relative to taxes and business debt.

An LLC, or limited liability corporation, is much more like a general partnership or sole proprietorship than a corporation. The owners declare the profits from the business on their own tax returns. No corporate return is required.

An S-Corp is a corporate structure that the Internal Revenue Service assigns a special status. "Subchapter S" status allows a corporation to avoid filing a corporate tax return, reporting instead any profits or losses on the personal return(s) of the owner(s). Otherwise, establishing an S-corporation means jumping through all the administrative hoops that federal, state and local governments require of C-corporations.

An S-Corp must be registered with state, and possibly, local authorities. Filing articles of incorporation and establishing by-laws are necessary steps. Shareholders have to elect a board of directors. Regular meetings must be calendared for both directors and shareholders, and minutes from these meetings must be recorded. In addition, like a C-corporation, an S-corporation must comply with any state or local business licensing requirements. Compliance with all these regulations usually means retaining legal counsel, something an LLC may not need to do to set up shop.

Neither the LLC nor the S-corp structure requires filing a business tax return. Both LLC owner-members and S-corp owners declare business income on their personal returns at tax-filing time.

As a distinction, S-corp owners are also shareholders, and shareholders who work for the company are required to pay themselves a salary that is in line with industry salaries for similar work. The owner pays income tax on that salary, but may or may not owe any taxes on the company's profits. On the other hand, LLC owners pay self-employment tax on 100 percent of the company's net income. Needless to say, this can create a burden.

Also on the downside for the latter structure, LLC means not only limited liability but limited life: If one of the owners dies -- or even goes bankrupt -- the LLC is automatically dissolved. This can be disruptive to business, especially for longstanding clients and employees. An S-corp, as a corporation, quite literally has a life of its own... legally speaking. The vicissitudes of mortality create no obstacle to the operation of an S-corp.

Taking a good, long look at the pros and cons of the S-corp and the LLC is crucial. Seeking legal advice on which structure best suits your circumstances is good practice.

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Six months after incorporation, Indiantown sees new businesses, ideas, but has lots to do There are new businesses and ideas in the village, but there's still lots left to do, residents say. Check out ...

Published:  Thu, 12 Jul 2018 11:50:00 GMT



Edgemont incorporation vote up to state appellate court

Edgemont incorporation vote up to state appellate court A referendum on a bid to make Edgemont a separate village is now in the hands of a state appellate panel Check out this story on lohud.com: http...

Published:  Mon, 09 Jul 2018 03:02:00 GMT



Merger by incorporation of IMI Investimenti S.p.A. into Intesa Sanpaolo S.p.A.

The authorisation released by the European Central Bank for the merger by incorporation of IMI Investimenti S.p.A. into Intesa Sanpaolo S.p.A. (OTCPK:IITOF) was filed on 12 July, 2018 with the Turin C...

Published:  Thu, 12 Jul 2018 11:36:00 GMT



Town submits incorporation application

TOWN OF BELOIT - Incorporation is one step closer, as Town of Beloit officials submitted the application to become the Village of Riverside. Town administrator Ian Haas submitted the application to th...

Published:  Thu, 05 Jul 2018 07:33:00 GMT



Infibeam Incorporation Ltd is up for a third straight session in a row

The stock is quoting at Rs 153.1, up 1.69% on the day as on 12:49 IST on the NSE. Infibeam Incorporation Ltd is up 35.43% in last one year as compared to a 11.62% spurt in NIFTY and a 36.81% spurt in ...

Published:  Tue, 10 Jul 2018 00:46:00 GMT



Vote No on the Town of Hobe Sound incorporation

The area selected by the originators of the boundaries of the Town of Hobe Sound is made up of many diverse communities, each with its own individual flavor. From Hobe Hills to the southwest to the Sa...

Published:  Sat, 14 Jul 2018 01:16:00 GMT



Tax Insider Tip: Incorporation of a Property Business - The $64,000 question

We're now into year two of the four-year plan to reduce the amount of interest residential landlords can claim on their property lettings business. This phased approach is leading to higher taxes for ...

Published:  Thu, 12 Jul 2018 04:02:00 GMT



IoT Device Management Market is touching new levels - A comprehensive study segmented by Key Players: MICROSOFT, ORACLE, PTC INCORPORATION

HTF MI recently introduced Global IoT Device Management Market study with in-depth overview, describing about the Product / Industry Scope and elaborates market outlook and status to 2023. The market ...

Published:  Mon, 09 Jul 2018 02:54:00 GMT



Turkcell completes incorporation of auto-motive firm

Turkcell announced it completed the incorporation and registration procedures of an auto-motive company in which it holds a 19 percent stake. 'Tí¼rkiye'nin Otomobili Girişim Grubu Sanayi ve Ticaret' wa...

Published:  Mon, 02 Jul 2018 00:28:00 GMT



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