An
LLC, or limited liability company, protects the owner from being held accountable for a company’s debt or losses. LLCs and corporations can be taxed as an S Corporation if they elect that status. An LLC is taxed like a partnership or sole proprietorship. This means, as an owner, you’re considered self-employed and need to file your own local, state and federal taxes, including Social Security and Medicare taxes.
But with S Corp taxes, things are a bit different. If you’re an S Corp owner, you can consider yourself an employee for tax purposes and therefore enroll yourself on the company’s payroll, avoiding self-employment taxes.
LLCs have a lot more freedom when it comes to the number of shareholders since there’s no limit. S Corporations can only have up to 100 shareholders with either individuals or certain trusts as owners. LLCs also don’t face as many regulations as corporations. LLCs can have multiple equity classes, whereas S corporations have the option of a single class of stock.
Depending on your business needs and goals, there are pros and cons to an S Corp vs LLC. Therefore, it's best to weigh out both options before choosing what's best for your business.