Liabilities and taxes are a business reality. You want to avoid them, but first, you must decide whether to incorporate your business as an LLC or an S-Corp.
LLCs are easy to set up and convenient, but S-Corps helps you save money. While the IRS doesn’t recognize the LLC structure, S-Corps have strict rules to ensure business compliance.
Every business structure has its pros and cons. So how do you make the right decision?
In this LLC vs. S-Corp guide, I’ll help you decide between the two by outlining the similarities, differences, and benefits. Ready?
What are LLCs and S-Corps?
The first step is to know what we mean by the terms ‘LLC’ and ‘S-Corp.’
What’s an LLC?
An LLC, short for Limited Liability Company, is a business structure that shields the owners’ personal assets—otherwise known as “members.”
According to CT Corporation, “An LLC is a hybrid entity, created to provide the liability benefits of a corporation, with the tax benefits of a partnership.” In other words, LLC members can enjoy a corporation’s limited liability feature, along with a flow-through taxation facility that’s only extended to partnerships and sole proprietorship owners.
Generally, whenever a business ends up in legal trouble or gets sued by a creditor, the plaintiff can lay a claim on the business’s and the owner’s assets. In the case of LLCs, creditors are prohibited from going after the former’s personal asset… Read More