Differences between LLC and S-Corp for businesses

Differences between LLC and S-Corp for businesses

| Jul 23, 2020 | Business Formation & Planning, Business Law |

People may have an idea for a new business in Louisiana or may have been working for a company for a long time and want to branch off and start their own business. This can be an exciting time, but business formation also takes a significant amount of planning before the business can be opened. After determining what product or service the business will be providing, one of the next steps people should take is determining what type of business structure they will use.

A couple of the more popular options for small companies when they first get started is forming the business as either a Limited Liability Company (LLC) or a S-Corporation (S-Corp). There are similar aspects of both an LLC and an S-Corp in terms of the personal protections they provide the individuals who own the companies. Also ,both are considered pass through entities for tax purposes meaning that the owners put the income from the business on their personal tax returns as opposed to filing a tax return for the business.

However, there are differences between the two as well. LLCs have members who manage the and control the business and S-Corps have shareholders who own the company. Another difference is that the members of an LLC can be anyone regardless of citizenship, but the shareholders on a S-Corp must be U.S. citizens and have legal standing to be here. There are also limitations on partnerships or other companies being shareholders of an S-Corp.

When companies in Louisiana go through the process of choosing a business structure, there are a number of aspects they should consider. There are pros and cons to both LLCs and S-Corps and which one a company chooses really depends on their unique circumstances. It is important to know who is going to be involved in running the business and the goals of the company before choosing one. Experienced attorneys understand the different business structures and may be a useful resource.