What Are The Main Differences Between An LLC And An S-Corporation?

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Both an LLC and an S-Corporation will protect the people involved. In a corporation, it would-be directors, officers, and stockholders. In an LLC, it would be the manager and any members who hold interest. If there is any type of exposure, the persons involved with those organizations are shielded from personal liability. There is a concept in corporate law called piercing the corporate veil. It happens when the people operating the corporation do not act like they are operating the corporation. They don’t put vehicles and property under the corporation’s name; they keep them in their own name. They sign documents under their own name. Their corporation is basically a shell where you can pierce the corporate veil and assign personal liability to officers, directors, or stockholders.

An LLC typically has more flexibility when it comes to taxes and they have more flexibility as far as management than a corporation does. Incorporations, if you change directors, it has to be refiled with the state. In an LLC, that is not necessarily the case. They both protect liability. An S-corporation is more similar to an LLC than a regular C-corporation. The tax liability can be created so that it is less than with a C-corporation.

If you are going to have foreign investors or work that is done outside the country, you’ll be better off with an S-corporation. All 50 states in the United States now recognize an LLC, so you won’t have a problem going from state to state.

What Are The Two Types of Corporations?

The difference between an S-corporation and a C-corporation is tax advantages with the S-corporation. When you file a corporation with the state of Florida, you do not designate if it is an S or a C type. It defaults to a C and then you have to file a tax document that makes it an S type. There are some other non-tax restrictions for an S-corporation as well.

In an S-corporation, you are limited to 100 shareholders. Protection from liability is the same and the setup is typically the same. You would file the articles of incorporation and then you have bylaws that are not filed but are there to help run the corporation. The management is a little more flexible with an S than a C corporation, but a LLC has better management flexibility than either the S or the C corporation does.

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