LLC or S-Corp. What's the Difference?

Ever wonder what the difference was in an LLC (Limited Liability Company) vs. an S-Corp? Here are some key differences between an LLC and an S Corp:

1. Ownership and Management: An LLC can have multiple owners, known as members, who can manage the company themselves or appoint managers to run it. In contrast, an S Corp is restricted to a maximum of 100 shareholders, who elect a board of directors to oversee the company's management.
2. Taxation: An LLC is a pass-through entity for tax purposes, which means that the company's profits and losses flow through to the individual members, who report them on their personal tax returns. An S Corp also has pass-through taxation, but it is subject to more stringent rules and requirements.
3. Liability Protection: Both LLCs and S Corps offer limited liability protection for their owners, which means that their personal assets are generally shielded from the company's debts and legal liabilities. However, LLCs may offer greater flexibility and simplicity in terms of ownership and management structure.
4. Formalities: An LLC typically has fewer formalities and record-keeping requirements than an S Corp. For example, an LLC is not required to hold annual meetings or maintain formal minutes, whereas an S Corp must adhere to more stringent rules regarding corporate governance and reporting.
5. Investor Attraction: S Corps may be more attractive to potential investors due to their established corporate structure and the ability to issue stock. However, LLCs may be a more attractive option for small business owners who prioritize flexibility and simplicity.

Overall, the choice between an LLC and an S Corp will depend on a variety of factors, including the company's ownership structure, tax situation, liability concerns, and growth plans. It's important to consult with a qualified attorney or accountant to determine the best option for your specific business needs.