Comparing S Corporations and LLCs
Both S Corporations and Limited Liability Companies (LLCs) provide "pass-through taxation" to business owners. This means that business owners report their share of company profits or losses on their individual tax returns.
The major differences between these two types of business structures are stock issuance and flexibility of ownership structure. S Corporations can raise capital by selling stock, but S Corporations cannot have more than 100 shareholders. While LLCs cannot issue stock, they do not require a corporation's formality and restrictions on ownership.
How do S Corporations and LLCs compare?
| S Corporations | LLCs | |
|---|---|---|
| Limited Liability | Owners can protect personal assets | Owners can protect personal assets |
| Taxation | Pass-through taxation | Pass-through taxation |
| Stock | Raise capital by selling stock | Does not have stock |
| Number of owners | Maximum of 100 | No limit |
| Type of owners | Individuals only | Other companies may own an LLC |
| Citizenship/residency | Owners must be U.S. citizens or residents | No restrictions on ownership |
| Annual meetings | Required | Not required |
Still deciding between an S Corporation and a Limited Liability Company? Call a Business Specialist for more information at 1-800-499-9519 (toll-free) or 1-302-636-5460. We'll help you save time and money on the business formation process.
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