An LLC (Limited Liability Company) and an S Corporation are two common business structures that offer different tax advantages and legal protections.
An LLC provides pass-through taxation by default, meaning the business income is reported on the owner’s personal tax return. S Corporations also offer pass-through taxation but allow business owners to classify some income as salary and the rest as distributions, potentially reducing self-employment taxes.
LLCs are simpler to set up and maintain, with fewer formalities, whereas S Corporations must follow strict requirements, including holding annual meetings and maintaining meeting minutes. To become an S Corporation, a business must file Form 2553 with the IRS and meet specific eligibility criteria.
Choosing between an LLC and an S Corporation depends on your business goals, income level, and desire for administrative simplicity. A tax professional can help you determine which structure is best for your situation.
