In researching the various business structures, one inevitably comes across the S corporation. S corps and LLC s are similar in that they are both "pass-through" entities for tax purposes; the income of these companies are passed through to their owners and reported on the owners’ personal income tax returns, thereby eliminating the double taxation incurred by owners of a standard corporation, or C corporation. (With a C corporation, the net business income is subject to corporate income tax, and the monies remaining after the corporate income tax are taxed a second time when they are distributed as dividends to its owners who must then pay personal income tax.) So what is the difference between an S Corp and an LLC ? And which structure is right for you?
The answer depends on your own unique situation. If operational ease and flexibility are important to you, an LLC is a good choice. If you are looking to save on employment tax and your situation warrants it, an S Corp could work for you.
Business Ownership & Operation
There are restrictions on who can be owners (called "shareholders") of an S corporation. An S Corp can have no more than 75 shareholders. None of the shareholders can be nonresident aliens. And shareholders cannot be other corporations or LLC s.