S-Corporation or an LLC?

One of the most commonly asked questions is whether someone should form a corporation or an LLC. You can find all kinds of advice online, but nothing substitutes from a dialog with a business law attorney that has experience and your best interests in mind.

S-Corp

  • Liability Protection
  • Pass Through Taxation
  • Shareholder Draws are not subject to payroll taxes
  • Draws must be pro-rata to ownership
  • Only one class of stock
  • All owners must be US Citizens
  • No more than 100 owners
  • Potential negative tax consequences on sale of real estate owned by a corporation
  • and more pro’s and con’s…

LLC

  • Liability Protection
  • Pass Through Taxation
  • Gross Receipts Fee based on revenue not profit. See: FTB
  • Few formalities and no required meetings or minutes
  • Flexibility in how to pay owners
  • and more pro’s and con’s…

Closely-Held S-Corp

If your business will have less than 35 owners and meets all the requirements for an S-Corp then you can elect to be Closely-Held. This election allows you, upon written agreement, to forgo annual meetings and minutes without adding personal liability. 

Ask for more info on this election for small business owners!

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