My client is considering forming a new entity. What are the differences between an S corporation and a limited liability company (LLC)?
An S corporation can only have a citizen or resident of the United States as a shareholder, whereas an LLC can have a foreign member. A corporation or partnership can be a member of an LLC, as opposed to an S corporation, which cannot have these entities as shareholders. S corporations have a limitation of 100 shareholders. LLCs, on the other hand, do not have this restriction. S corporations require an election to be filed with the Internal Revenue Service (IRS) and New York State (NYS), and LLCs do not need to do this. LLC members are responsible for payroll taxes on all LLC earnings for which they materially participate. S corporation shareholders are responsible for payroll taxes for the salary that is taken from the S corporation and not for the income on the S corporation K-1. LLCs must take a publication ad in a newspaper for six weeks. S corporations are not bound by this requirement. S corporation shareholders are not responsible for uncollected sales tax if the corporation de
