LLC vs. S Corporation

In this LLC vs S Corporation article, we will highlight advantages of the LLC and S Corporation along with some key differences between the LLC and S Corporation. Many businesses now utilize the LLC business structure along with the S Corporation tax classification. In other words, you can have the best of both worlds.

LLC Advantages

S Corporation Advantages

Shared Advantages

It is important to note that in a few cases, both LLCs and S Corporations share some of the same advantages:

  • Personal Liability Protection: Both an LLC and an S Corporation keep the business separate from the owners, and give the owners personal liability protection for business debts, obligations, and legal disputes.
  • Perpetual Existence: Both an LLC and an S Corporation can have “perpetual existence” that is, they typically last even after the owner or owners have passed away.
  • Multiple Owners: Both can have one or more owners, although an S corp cannot have more than 100 owners.
  • Credibility: Both give the owners of the business much more credibility in the day to day business with customers, vendors, and banks, since it appears the owners in both these business entities have more of an interest invested in their company.
  • Pass Through Taxation: Both the LLC and S Corporation are pass through entities (federal taxes are not levied on the entity…only its owners).
Please note that tax issues are complex. As such, you must not rely on this article or website as tax advice. This website and/or article above is not a substitute for the advice of an attorney or tax professional. According to IRS Circular 230 to ensure compliance with requirements imposed by the IRS, we inform you that any tax advice contained in this writing was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any matters addressed herein.

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