Difference Between LLC & S Corp

by Contributing Writer

Overview

An S corporation passes its profits, losses and deductions to its shareholders for federal taxes. A limited liability company (LLC) is a business entity formed to limit the liability of its members who may be individuals, corporations or non-profits.
LLCs and the IRS

LLCs are not a classified business type according to the IRS, so an LLC business must choose its tax-filing structure. The choices are sole proprietor, corporation or partnership.

S Corporations and the IRS

The designation of S corporation is solely for tax structure purposes. S corporations are corporations in every other function.
Forming an LLC

To form a limited liability company, first register your business with your state. Then follow the process outlined by your state for completing the process.
Forming an S Corporation

Only a recognized corporation can become an S corporation. To do so, all shareholders must sign the IRS Form 2553 (Election by a Small Business Corporation) and submit it to the IRS.
Deciding Between an LLC and an S Corporation

This decision will likely depend upon how you want to file and pay taxes. Get advice from your accountant before making it.

Overview