Most every business start-up has come across the question “LLC or S corporation?”.
While this is a very common question, the response is often different depending on who you are talking to.
It should be noted that an LLC might work for some while an S corporation could be better for others – there is no “one size fits all” approach to entity selection.
In short, here are a few pro’s and con’s for the LLC and S Corporation entity structure:
- PRO – Divide profit as members see fit
- CON – Passthrough income subject to self-employment tax if member has personal liability for debts of LLC or actively participates in trade or business of LLC
S Corporation –
- PRO – Passthrough income is not subject to self-employment tax. Only employee-shareholder “reasonable compensation” subject to payroll taxes.
- CON – Only issue single type of stock and must distribute profit based on percentage of stocked owned
Of course there are many more pro’s and con’s for each entity selection – feel free to call us with any questions and will be happy to discuss more (800) 425-0570.
For more related information visit the following links:
http://tiny.cc/xjz22x IRS: Partners’ Share Of LLC Income Is Subject to Self-Employment Tax
http://tiny.cc/smz22x 5 Common Objections to Forming a Corporation or an LLC