LLC vs S Corp:
Which is Right for You?
Trying to figure out the best entity type can be confusing. Bizee helps make it easy.
What Are the Differences Between an
LLC vs. an S Corp?
A Quick Side-By-Side Comparison
|
LLC |
S Corp |
|
|---|---|---|
|
Liability |
Limited liability protection |
Limited liability protection |
|
Ownership |
Unlimited members; flexible |
Max 100 shareholders; U.S. only |
|
Taxation |
Self-employment tax on full profits |
Salary taxed; dividends often not taxed |
|
Management |
Flexible (members or managers) |
Board of directors and officers |
|
Formality |
Low; fewer requirements |
High; meetings and records required |
|
Stock |
No stock issued |
One class of stock allowed |
LLC
Liability
Limited liability protection
Ownership
Unlimited members; flexible
Taxation
Self-employment tax on full profits
Management
Flexible (members or managers)
Formality
Low; fewer requirements
Stock
No stock issued
S Corp
Liability
Limited liability protection
Ownership
Max 100 shareholders; U.S. only
Taxation
Salary taxed; dividends often not taxed
Management
Board of directors and officers
Formality
High; meetings and records required
Stock
One class of stock allowed
Why Do Over 1,000,000
Businesses Choose Bizee?
Benefits of Choosing an
LLC or an S Corp
Key Advantages of Each Structure at a Glance
|
LLC |
S Corp |
|---|---|
|
Pass-through taxation to avoid double taxation |
Pass-through taxation to avoid double taxation |
|
Shields personal assets from business debts |
Shields personal assets from business debts |
|
Simple to form and manage |
Additional credibility with formal corporate structure |
|
Flexible ownership and management |
Structured, with clear roles and responsibilities |
|
Profits split freely among members |
Owners paid salary first; extra profits paid as dividends |
LLC
Pass-through taxation to avoid double taxation
Shields personal assets from business debts
Simple to form and manage
Flexible ownership and management
Profits split freely among members
S Corp
Pass-through taxation to avoid double taxation
Shields personal assets from business debts
Additional credibility with formal corporate structure
Structured, with clear roles and responsibilities
Owners paid salary first; extra profits paid as dividends
FAQs
-
An LLC is a flexible business structure that protects your personal assets and offers simple tax options. An S Corp is actually a tax classification you can choose for an LLC or a corporation. It can help reduce certain taxes, but it comes with more rules and paperwork.
-
Yes. If your LLC meets the requirements, you can elect to be taxed as an S Corp with the IRS. This can lower your self-employment tax, but you will need to run payroll and pay yourself a reasonable salary.
-
It depends on how much money your business makes and how you pay yourself. S Corp taxation can save you money on self-employment taxes if your business is earning steady profit. LLC taxation is simpler and has fewer rules to follow.
-
Usually, yes. S Corps come with more rules, like payroll, extra tax filings, and detailed bookkeeping. LLCs are easier to run, which is why many entrepreneurs choose them when starting out.
-
Many business owners think about switching when their net income hits around $40,000 to $60,000 per year. That’s often the point where the tax savings can outweigh the extra work.
Everything You Need to Know About
LLC and S Corp Formations
Carousel
Carousel-
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Legal Jargon Every Business Owner Needs to Know
An overview of essential legal terms and why they matter to you.
-
The Complete Guide to Pass-Through Taxation for Small Business Owners in 2024
Upsides, downsides, and tax-saving strategies.
-
How to FIle an S Corp Tax Election
An in-depth look at Form 2553 and its potential advantage to your business.
File Your LLC or
S Corp Today
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