Business Entity Type

If you have your own business, you could be contemplating a choice that many entrepreneurs face: Should your enterprise be structured as a limited liability corporation (LLC) or an S corporation (S corp), which is named after subsection S of Chapter 1 of the Internal Revenue Code?

These two organizational forms have similarities and differences–which can make choosing between them and others, (like a C corporation) confusing at best. Each state might also have different rules that come into play. You’ll want to get some input from a respected accountant and/or attorney to help you decide what might be the best fit for your business.

Incorporating as an S-Corp or forming your company as an LLC both have distinct advantages for you and your business.

Yearly, more people start LLCs than S-Corps. When considering the LLC vs. S-Corp question, keep in mind that limited liability companies are a bit easier to start and to run, and generally they take less upkeep to remain compliant.

If you’re planning on selling stocks, if you want the most possible protection, and you’re planning on looking for investors, think about starting an S-Corp.

Conversely, if you don’t want to sell stocks, want less paperwork, but want the most flexibility, consider forming an LLC.

Posted in Taxes