What are the differences between an LLC and “S” Corporation?
LLCs and “S” Corporations are more alike than different. Both shield owners against personal liability, and avoid double taxation of federal income tax. An LLC is less formal than an “S” Corp. For example, an LLC does not require an annual meeting of stockholders, nor are you required to keep minutes of member meetings. For more details on which business entity is right for you, please contact an NSBDC counselor, your attorney or your CPA.
An LLC and an S-corporation share many tax characteristics. The LLC does have more flexibility and less restrictions than an S-corporation. S-corporations have stricter formalities such as the requirement to hold an annual meeting of stockholders. S-corporations cannot issue more than one class of share and they cannot have more than 100 stockholders. Owners of an LLC are required to pay medicare taxes and social security on the profits of an LLC. A corporation’s stockholders are not required to pay these taxes on profits over and above the stockholder’s salary.
