| For years smaller businesses used the structure of an | | | | around the issuing of stock and dividends. Again, an |
| S-corporation to benefit from "pass-through taxation" | | | | LLC does not issue stock to its owners nor does it |
| while avoiding the double taxation imposed on a C | | | | pay dividends. |
| Corporation. Then in 1988 the IRS decided to get in | | | | "An S Corporation is limited to 100 owners. There is no |
| sync with several states which had passed legislation | | | | such limit with an LLC. |
| allowing the formation of a legal entity called a "Limited | | | | "All stockholders in an S Corporation must be U.S. |
| Liability Corporation" or LLC. | | | | citizens or residents. LLC owners do not have to meet |
| It wasn't long until other states began to pass their | | | | this criterion. In fact, even other business entities are |
| own versions of this legal entity. Today all fifty states | | | | allowed ownership in LLCs. |
| offer the LLC as a choice of legal business entity | | | | "Profits are split among stockholders in an S |
| formation alongside the traditional C Corporation, | | | | Corporation based upon the number of shares held by |
| Subchapter S Corporation, General Partnership, Limited | | | | each. Profits from an LLC may be split among the |
| Partnership and possibly others. | | | | owners disproportionately to each member's |
| Are the differences between the LLC and S | | | | percentage of ownership. What a concept! |
| Corporation significant enough to justify all the hoopla? | | | | As you can see, there are quite a few differences to |
| Let's take a look and you can decide for yourself. | | | | consider. Your set of circumstances and the vision |
| "Forming an LLC is much less complicated than | | | | held for your company will determine which entity can |
| forming a Subchapter S Corporation. A Subchapter S | | | | best serve those interests and purposes. It is possible |
| Corporation requires forming a corporation with the | | | | that the S Corporation structure will cost more to form |
| state then making an election to be taxed as an S | | | | as well as to operate to meet the additional state |
| Corporation (pass-through taxation) with the IRS. | | | | requirements of a corporate structure. However, each |
| Forming an LLC simply requires submitting Articles of | | | | state varies in its requirements for formation and |
| Formation to the state and creating a written | | | | operation. The more obvious choice may not always |
| document declaring how the business will be managed | | | | prevail upon a more thorough investigation of all |
| and operated. | | | | requirements and costs. |
| "Corporations have stringent requirements for how | | | | Before you embark upon forming your business as a |
| they are formed and operated and an S-corporation is | | | | Subchapter S Corporation or an LLC, be sure to seek |
| not exempt from these. | | | | adequate counsel from professionals who are well |
| -Corporations must hold a formal stockholder meeting | | | | versed with each entity in your states of interest. |
| each year. An LLC is not required to do this. It doesn't | | | | Disclaimer: This article is for informational and |
| have stockholders. | | | | entertainment purposes only, and should not be |
| -Corporations have a myriad of legal requirements | | | | construed as legal advice on any subject matter. |