One argument that you will find among businesspersons is the LLC vs S Corp. The LLC vs S Corp argument is designed to convince people that either the LLC or the S Corp is a better choice for a business structure. To help determine which structure would be better for your business you will need to learn about the advantages and disadvantages of each structure.
The first thing that comes to mind with the LLC vs S corporation argument is the how they are structured. In order to qualify as an S Corporation the corporation must have a maximum of 75 shareholders. The shareholders cannot be other corporations or businesses, the shareholders must be an individual. With an LLC, you can have as many members as you want; there is no minimum or maximum amount of members. Another advantage of the LLC is that the members of the LLC can be other businesses, including LLCs.
Another basic LLC vs S Corp argument that you will find is the S Corp has an independent life when compared to the LLC. With an LLC if one of the members dies or retires than the LLC is going to cease to exist. With an S Corp if one of the shareholders dies or retires the S Corporation can still exist. In most cases, the S corporation can continue with their normal operation of business without being disrupted by the death of one or more shareholders. With an LLC, you can arrange when first forming the business about what will happen to the LLC if one member wants to sell their share of the business, but in most cases the LLC dissolves and you must reform.
Another argument that needs to be considered when deciding between these two business structures is the LLC vs S Corp tax methods. Both the LLC and the S Corp allow pass through taxation, which is the biggest difference between the S corporation and a regular corporation. In an S corporation, the corporation is taxed like a partnership and the corporation pays no income taxes. The profit or loss is passed through directly to the stockholders. With an LLC, all of the profits, losses, and expenses flow through the company to each individual member. What most people are trying to avoid is the double taxation of the corporate structure, but in some cases that can be an advantage.
Another disadvantage that you face with an LLC is that you cannot take your business public. If you have any plans to take your business public in the future, no matter how far into the future that might be, it is in your best interest to avoid the LLC structure. If you choose an S Corporation, you will be able to take your business public and still reap the tax benefits of an LLC.
Another thing that comes up is the single member LLC vs S Corp argument. The reason that this comes up is people feel that a single LLC provides advantages over an S Corp or vice versa. The biggest difference between a single member LLC and an S Corp is the number of members or shareholders that each one has. An S Corp cannot be formed with only one member; where as the S Corp requires corporate officers and shareholders to run the business.
