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Like a corporation, the owners of an LLC are generally not personally liable for company debts. Your access to the website is subject to our.Ī limited liability company, or LLC, is a business entity created under state law that combines characteristics of both a corporation and a partnership. We cannot provide any kind of advice, explanation, opinion, or recommendation about possible legal rights, remedies, defenses, options, selection of forms or strategies. We are not a law firm or a substitute for an attorney or law firm. LegalZoom provides access to independent attorneys and self-help services at your specific direction. Disclaimer: Communications between you and LegalZoom are protected by our but not by the attorney-client privilege or as work product. While the S corporation is popular among small business owners, C corporations have greater tax planning flexibility and can shield shareholders from direct tax liability. The shareholders still have to pay taxes on money that they receive from the corporation, but an S corporation does not pay taxes on its net income. S corporations have only one level of taxation.
The IRS allows corporations to choose to be taxed as either a 'C corporation' or an 'S corporation.' Income from C corporations are subject to double taxation that is, the corporation pays taxes on its net income and then the shareholders also pay taxes on the income that they receive from the corporation. That is because an S corporation owner is required to pay self-employment tax only on salary, but not on dividends from the corporation. On the other hand, LLCs generally are not required to hold formal meetings, but an LLC owner may be subject to higher self-employment taxes than a comparable S corporation owner. An S corporation is also subject to more formalities, such as holding annual meetings and keeping corporate minutes. An S corporation must not have more than 100 shareholders, all of whom must be U.S.Ĭitizens or legal residents. Although an S corporation shares many of the same tax characteristics as an LLC, an LLC has more flexibility and fewer restrictions on ownership than does an S corporation. This means that the LLC does not pay taxes on its profits, but instead, profits and losses are 'passed through' to the owners, who must then pay tax on their share of LLC income. Like a sole proprietorship or a partnership, an LLC has operating flexibility and is, by default, a 'pass through' entity for tax purposes. CLICK HERE TO DOWNLOAD= CheckSoft Home & Business.Ī limited liability company, or LLC, is a business entity created under state law that combines characteristics of both a corporation and a partnership.
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