There’s confusion regarding the difference between LLCs vs. S Corps, this article is for you! Here, we clarify the difference and provide guidance on which option is best for you.
Before we get to the best qualification for your small business regarding tax filing, let’s define an LLC and an S Corp so that we know what each designation means.
What is an LLC?
First, an LLC is a limited liability company. It is a legal designation. Secondly, this business structure protects the owner from personal liability regarding business activities. The LLC considers the business owners as “members” and they are self-employed. An LLC can have one or more owners who can actively participate in a business organization or be hands-off. Further, an unlimited number of owners can reside anywhere in the world.
What is an S Corp?
An S Corp is a tax classification. It is desirable because it protects business owners from double taxation. Like an LLC, owners can be hands-off; owners of an S Corp may also take a salary as an employee. There is a limit to the number of owners of an S Corp – there can be no more than 100 owners, and all must be United States citizens.
