status two months and fifteen days after officially organizing your business (for the status to affect the current tax year), capping ownership at 100 individuals (not entities or partnerships), and limiting those owner shares to U.S. The requirements include electing S corp. When incorporating a business, you'll first form a C corp. stands for “subchapter," because an S corp. This ensures profits aren't double-taxed (once under the corporation and again under the owner). utilizes pass-through taxation, meaning an owner claims a share of company profits on their individual tax return. tax status.Īn S corporation is a tax classification that can protect small-business owners' assets from double taxation. An LLC can also choose taxation as a corporation, and owners can save money by electing S corp. An LLC is more flexible than a corporation in organization and profit distribution. LLCs offer a formal business structure, while they can also be taxed similarly to sole proprietorships or partnerships. If you form an LLC, you'll also need to file IRS Form 2553 to elect a tax classification. Owner-employees of LLCs are self-employed. LLCs can have one owner (single member LLC) or more than one owner (multi-member LLC). What is an LLC?Ī limited liability company is a legal designation that can protect small-business owners from personal liability in business obligations. You can use this guide to sort out the differences between LLCs and S corporations to make the best decision for your business. Whether you're curious about establishing an LLC or about launching an S corporation, starting a business is an exciting undertaking full of learning experiences. is that an LLC is a business entity while an S corp. Limited liability companies (LLCs) and S (Subchapter) corporations are often discussed together, but this is misleading.
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