What is better, LLC or S-Corp?

starting a business can be very exciting. It is important to choose the right business structure to meet the needs of the business. Depending on the current situation and future business goals, one business structure may be better than another. Many business owners spend hours and money by trying to decide between limited liability companies and Corporation (S-Corporation); However, both have advantages and disadvantages - again depending on the nature of the business itself.

LLC is a type of trade structure available in every state. It has many same tax benefits as partnerships or S-Corporations, but does not have so many restrictions associated with shareholders. It protects the company's owner or member from personally responsible - like partnership. In addition, it provides tax benefits of members at individual level-similar to S-Corporations.

In many cases, what makes LLC better than S-Corporation is that LLC does not limit the number of shareholders. S-CorpoRations can have up to 100 shareholders and shareholders must be the United States. LLC has no limitation of the number of members and has no restrictions on citizenship of its members. As a result, people outside the US, domestic corporations and other business groups can participate.

LLC can have several types of stocks. These types or inventory class can be divided between preferred or ordinary shares. They can be sold at different prices and differ as dividends pay off. LLC can also own shares in another corporation.

LLC establishment allows the owner of the company to avoid dual taxation-entitlement to corporation and personal level-which is associated with traditional C-Corporation; However, it still provides a protuberance from personal responsibility and sales of shares. The transfer of fully functioning LLC business can be expensive, so it is recommended mainly for new start -ups. In addition, LLC is regulated by the state tax laws - therefore, with the controLook at the State Secretary and see if this is the right choice for your new business.

S-Corporation is a corporation with less than 100 shareholders and one stock class. All profits pass directly to the owners and are taxed as income - thus preventing double taxation. S-Corporation is ideal for people who are in the lower tax band because any income obtained by S-Corporation is undergoing shareholders and is taxed at the level of a shareholder's personal tax. In this case, the total amount of tax paid will be smaller. Before creating S-Corporation, talk to your accountants to prevent problems, as it depends so much on the future earnings of the company.