Deciding between a Sub S Corp and an LLC

Deciding between a Sub S Corp and an LLC

| Oct 6, 2018 | Business Law |

Leaving the cubicle life and becoming a Louisiana business owner is a big step. Part of starting off on the right foot is structuring the organization to meet your needs and goals. At Dale M. Maas, Attorney at Law, we have experience helping clients choose the business entity that suits their unique situation.

According to Entrepreneur, a Subchapter S Corporation and an LLC are the most common business structures, each with tax benefits and drawbacks. It is crucial that you understand how each affects your particular situation before embarking on life as an entrepreneur and registering your company.

The benefits of a Sub S Corporation include the fact that there is a single level of taxation, unlike the double taxation in a standard corporation. Losses and income pass through to the shareholders and there are savings on payroll taxes. The drawbacks include a limitation of the company size. It cannot have more than 100 shareholders. This type of entity must also be domestic and can only offer one class of stock.

An LLC may suit your needs if you intend to take on debt, plan to grow the organization or create a preferred class of equity. A benefit is that this structure can protect your personal assets in the event of a lawsuit. There is no limitation on the number of shareholders and there is flexibility in the type of stock offerings. However, keeping business separate records and creating an operating agreement takes more time and money, than a Sub S Corporation.

Choosing the right structure for your new business can save you time and money in the long run. Due to the variety of factors involved, it can be a complex process. Visit our webpage for more information on this topic.