TopConsumerReviews.com is a world-leading consumer product review site. We provide detailed reviews and ratings for thousands of products and services.

 

Go To Reviews >

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.

Go To Reviews >

Top Consumer Reviews Articles

TopConsumerReviews.com provides unique articles that you won't find anywhere else on the internet. These articles are designed to help you make the most informed decisions possible.


Company Incorporation In The News

Why Helmerich & Payne Inc (NYSE:HP) Looks Like A Quality Company

One of the best investments we can make is in our own knowledge and skill set. With that in mind, this article will work through how we can use Return On Equity (ROE) to better understand a business.

Published:  Thu, 15 Nov 2018 13:25:00 GMT



CPNP 2018 Small Business: Taurean General Services Inc.

Taurean General Services Inc. is dedicated to its purpose of finding work, creating jobs and changing lives for the glory of God. The company has a heart for various philanthropic efforts, including h...

Published:  Thu, 15 Nov 2018 10:00:00 GMT



Akebia Therapeutics and Keryx Biopharmaceuticals Announce Chairperson for Combined Company

Mr. Adams currently serves as Chief Executive Officer and a director of Aralez Pharmaceuticals Inc., a pharmaceutical company that focuses on the development, acquisition and commercialization of card...

Published:  Thu, 15 Nov 2018 13:15:00 GMT



Business Newsmaker: People Incorporated welcomes new additions to leadership

People Incorporated is pleased to announce the appointment of two new employees to leadership positions within the agency. Beth Pelletier will fill the role of vice president of human resources, and M...

Published:  Thu, 15 Nov 2018 13:22:00 GMT



Evanta, A Gartner Company, nominates TTEC Leaders to CISO and CMO Governing Bodies

DENVER, Nov. 15, 2018 /PRNewswire/ -- TTEC Holdings, Inc. (NASDAQ: TTEC), a leading global customer experience technology and services company focused on the design, implementation and delivery of tra...

Published:  Thu, 15 Nov 2018 14:22:00 GMT



Colony Capital and HB2 Announce Formation of New Energy Focused Investment Management Platform, "Colony HB2 Energy"

LOS ANGELES--(BUSINESS WIRE)--Nov 15, 2018--Colony Capital, Inc. (NYSE: CLNY) today announced that it has formed a new energy focused investment management platform in partnership with HB2 and its sea...

Published:  Thu, 15 Nov 2018 14:55:00 GMT



4 Reasons Airline Alliances Are Good for Business Travel

Although airline alliances greatly serve travelers, many people don't believe that consumers can benefit from a business deal that started over 20 years ago. While each airline alliance has tremendous...

Published:  Thu, 15 Nov 2018 13:52:00 GMT




- View Full Site -