Are there tax advantages to an S Corporation as compared to an LLC?
An S corporation may have several potential advantages as compared to an LLC, or limited liability company. Before I discuss the relative tax advantages of S corporations versus LLCs, however, I should go over the basics of S corporation and LLC taxation. Basics of S Corporation versus LLC Taxation S corporations are created when an eligible entity (traditionally a corporation) elects to be treated according to the rules of Subchapter S of the Internal Revenue Code and its related regulations. S corporations, therefore, are really a tax accounting classification rather than a legal entity. An LLC, in contrast, is actually a legal entity created by state law through the filing of articles of LLC formation or some similar document. A second important point: An LLC is a chameleon for tax purposes. LLCs with one owner, or “member”, can be disregarded (or ignored) for tax purposes. And this “ignoring” or “disregarding” just means that the LLC’s activities are reported on its owner’s regular
