How does an LLC compare with a Sub S Corporation?
An LLC s flexibility and ease of operation make it very favorable to small businesses. An S-Corp, while having similar pass-through taxation benefits, does not allow for flexible distribution of profits or losses. Further, S-Corps must maintain statutory corporate formalities. An LLC can have multiple owners, without restrictions on type or classification, and may offer several different classes of ownership interest. An S-Corp is restricted to 75 shareholders, with restrictions on type and classification, and can offer only one class of stock. While the LLC and S-Corp both provide limited liability protection and similar pass-through tax advantages, the LLC has far less restrictions or formalities it must adhere to. For this reason many small business owners are now forming as, and enjoying the benefits of a limited liability company. We urge anyone who may need more guidance in choosing which entity is best suited for their business to consult their tax or legal advisor.
