LLC vs. S Corporation

There are many similarities between an LLC and a S corporation. In either case, there may be a small number of shareholders for the company or corporation. However, there are also many differences, including the manner in which a S corporation is taxed vs. the manner in which an LLC is taxed.

Both an LLC and a S corporation may have limited liability in financial or legal issues. The amount of liability may vary depending upon the jurisdiction, as well as the legal question at hand. In either case, the individual owner, employee or shareholder cannot be held liable for the actions of the company. However, individuals can be held responsible if the individual acted alone using their position at the company in issues that involve liability.

Taxes are a major difference between an LLC and an S corporation. An S corporation is taxed only one time when the profits are distributed to shareholders. The profits are not taxed at the company level, and instead, taxes are paid by individuals on those profits as a form of income.

LLCs are taxed very differently, depending on the jurisdiction and can include double taxation on the profit when the company makes money and again when that money is paid out to employees, owners or shareholders.

There are many similarities and differences with an LLC and an S corporation. The manner in which individual owners wish to form their company or corporation will depend on many factors, including the types of business, number of owners and size of the company. In addition, issues of liability will certainly be considered when a company is formed.

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