What is the difference between an S-corporation and a Limited Liability Company (LLC)?
Both entities provide the benefits of pass-through taxation to avoid double taxation of profits as well as limited liability for the owners. An LLC has more operating flexibility and fewer restrictions than a S-corporation. For example, there are restrictions on the type and number of shareholders that are permitted in an S corporation that are not imposed on the member-owners in an LLC. Corporations must hold annual meetings of shareholders and follow certain other record keeping requirements not legally required of an LLC. On the other hand, shareholder-employees of an S corporation may pay less taxes overall than members (owners) of an LLC. It is generally less expensive to form an S corporation than an LLC, particularly in California where additional taxes are imposed on LLCs. For more information on the comparison between LLCs and corporations, click here.
