LLC ADVANTAGES OVER A S-CORPORATION
LLCs and “S” corporations are similar in many ways. From a tax perspective, both are treated as pass-through entities (no double taxation). Both entities provide limited liability to the owners of the business.
The LLC offers far more flexibility than an “S” corporation. In order to be considered an “S” corporation, a company must meet the following requirements:
- The entity must not have more than 100 shareholders
- Shareholders must be U.S. citizens or residents, and must be natural persons, so corporate shareholders, partnerships, and multi-member LLCs are excluded
- The entity must have only one class of stock
- Profits and losses must be allocated to shareholders proportionately to each one's interest in the company
- Corporate formalities must be followed
