What is an LLC?
An LLC is a flexible business structure that many small business owners use because it is simple to manage and easy to maintain. It helps separate business activity from personal activity and gives owners flexibility as the business grows.
What is an S-Corp?
An S-Corp is not a separate business structure by itself. It is an IRS tax election that some LLCs or corporations may choose if they qualify. Business owners often consider an S-Corp election when the business has consistent income and the owner is actively working in the business.
When an LLC may be a good fit
An LLC may be a good fit when the business is new, income is still developing, the owner wants fewer administrative requirements, or the business does not yet need payroll.
When an S-Corp may be a good fit
An S-Corp may be a good fit when the business has steady income, the owner works in the business, and the business can support payroll, bookkeeping, and additional filing requirements.
Key things to review
Before choosing, business owners should review income level, payroll needs, bookkeeping records, IRS filing deadlines, state requirements, and whether the extra responsibilities make sense for the business.
Need help deciding?
Corporate Tax Services can help review your business structure and explain whether an LLC or S-Corp election may be appropriate for your situation.