As you begin the process of starting your new business, selecting the most advantageous business type for your endeavor is crucial to the success of your business. There are multiple types of business entities to select from, and LLCs and S corporations are typically the most favorable options, however they each have their own unique characteristics, from taxes to management structure. In some cases, a business can even have the opportunity to become both an LLC and an S-corp.
To understand which business entity will best suit your business, it is important to understand their differences. In this article, we will explain to you the distinct characteristics of each business, so that you can gain an understanding which is the right entity for you.
What defines an LLC?
A limited liability company (LLC) is a legal status concede to businesses. This designation can alleviate the business owners of personal responsibility for their business’s debts or liabilities and initiates the business as its own legal entity. This business structure is also more flexible compared to C-corporation and S-corporation and offers such benefits as pass-through taxation, limited liability, legal protection for the personal assets of company members and increased legitimacy for your company.
Legal Zoom has stated that, under the majority of instances, LLC status presents numerous benefits for business owners. “LLCs aren’t bound by the same rigid rules of corporations, but this doesn’t stop them from being just as useful, It doesn’t matter if you’re a one-man business or if you have hundreds of employees, an LLC keeps protecting you while allowing for expansion and growth. With an LLC, there’s no requirement for special meetings, extensive corporate records, or many other formalities.”
What defines an S Corporation
An S corporation, commonly known as an S-corp or S subchapter, is a tax alternative that allows the IRS understand your business is required to be taxed as a partnership. It also protects your business from receiving corporate-level double taxation. In order to for your business to achieve S-corp status, it must initially register as a C corporation or LLC. S corporations are exempt from paying federal taxes. Alternatively, the company’s individual shareholders divide the profits (or losses) amongst each other and report it on their own individual income tax returns.
The Differences Between LLC & S-Corp Status
Small business startups typically choose to structure their business as an LLC because it presents more freedom than S-Corp structure. However, before beginning this crucial decision process, it’s imperative to understand the differences between the LLC and S-corp. Nevada Small Business Consulting offers consulting services that will allow you to thoroughly understand the intricate differences of these two entities and can help you decide the best coarse of action for your business. You can contact us today at (702) 758-4691 to scheudle a no-cost initial consultation.
Nevada Small Business Consulting provides assistance for small business startups and have assisted hundreds of enterprises obtain LLC State Licensing, S-Corp status in the Las Vegas and surrounding areas. Learn more about our creative small business consulting service, ongoing coaching support and allow us provide the guidance you need to achieve your business goals. You can contact us today at (702) 758-4691 to scheudle a no-cost initial consultation.