LLC vs S Corp
Which is better: the LLC or S-Corp? You can have both!
Many people believe that an S-Corp is a type of entity, when in fact the term “S-Corp” is really just the term used to describe an entity (LLC or Corporation) that has elected to be taxed under sub-chapter S of the IRS Code. Both corporations AND LLCs can be taxed under sub-chapter S of the IRS tax code.
When starting a new business venture, one of the first decisions you’ll face is whether to organize as an LLC or Corporation. There are other types of business entities to choose from too, but the LLC and the Corporation are by far the two most popular options, especially for smaller businesses and individual owners. For more on this topic, we have an entire article on LLCs vs Corporations.
What Is an S-Corp LLC?
A Limited Liability Company (LLC) taxed under sub-chapter S of the IRS Code is often called an S-Corp LLC. By default an LLC is taxed like a partnership (or sole proprietorship if the LLC is own by only 1 member). An LLC is allowed to elect to be taxed as an S-Corp. The reason an LLC would elect the S-Corp tax classification is to reduce the self employment tax obligations of the LLC’s owners. Read more about LLC taxation.
The S-Corp LLC is a popular option. Please note that tax issues are complex. We are not tax specialists. As such, we must recommend that you consult a tax professional if you have specific questions or special circumstances. According to IRS Circular 230 to ensure compliance with requirements imposed by the IRS, we inform you that any tax advice contained in this writing was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any matters addressed herein.