LLC vs S Corp
LLC vs S Corp is a consideration many business owners face when setting up their companies. The LLC (Limited Liability Company) is a business entity that allows the owners to set up the business one of a few ways for tax purposes. A business owner can choose to be taxed as a Partnership, C Corporation or Sole Proprietorship when filling out the SS4 form for the LLC.
The S Corporation is an entity that is initially formed with the state as a C Corporation and then the business owner can file Form 2253 with the IRS to elect S Corporation tax status. The S Corporation tax status is similar to a Partnership’s tax status.
LLC vs S Corp Tax Status
The LLC vs S Corp tax status is the same if the business owner elects to have the LLC taxed as a Partnership when setting up the entity. The owners of the LLC report profit or loss on their personal tax returns, if they are holding ownership interests as individuals. The report the profit or loss the same as a general partnership or sole proprietorship would.The S Corp also reports profit or loss on the individual tax returns of the owners. This is referred to as a “pass through” tax status. When comparing the LLC vs S Corp when it comes to tax purposes, as long as they both are electing the pass through tax status, there is no difference.
However, there are still differences between the LLC vs S Corp when it comes to how ownership can be held, the number of shareholders and certain tax deductions. LLC members (owners) can be U.S. citizens, non-U.S. citizens, other entities or foreign entities. Owners of the S Corp have to be individuals with a U.S. social security number with rare exceptions. Click here to learn more about S Corps from irs.gov.
Choosing a LLC vs S Corp Incorporation Service
When choosing an incorporation service provider to set up a LLC or S Corp, business owners need to select a company with credibility. A credible incorporation service provider will provide registered agent services, minutes and corporate resolution paperwork assistance and has filed entities for several years. Click here to review Incorporate.com
It’s best not to select a new incorporation service to file a LLC or S Corp because of the amount of detail required to file the entity with each state. The more experience an incorporation service has the better.