LLC v. S-CORP
There are numerous legal and practical differences
between the two. In keeping with my practical view, rather
than technical, you can find those answers elsewhere. Most often you
are better off with a limited liability company. If you form
an S-Corp you will be required to keep corporate minutes, must file
an annual report, and must have a directors meeting. This may
not seem like a big deal until its the end of the year and you
haven't done it. Then its a major headache. If you don't
do these things, you may lose your limited liability. This is
not required with a LLC.With a S-Corp you
can only have one class of stock which means distribution must be
equal. Sometimes this will not be practical. Maybe you
brought in more money than your partner and agree you should receive
more. With a LLC you can distribute earnings however you and your
partners decide.
S-Corp shareholders can only be US citizens or
permanent residents. This may not seem like much of a problem
but if you ever need a more complex business structure it can be.
LLC members (owners) may be individuals, corporations, partnerships,
many trusts, and even non-resident aliens. So if you need to
have flexibility it is better to be a LLC. Also, in most
states it is cheaper to file for a limited liability company.
It is possible to save some on self employment tax
in rare cases with an S-Corp. This is beyond the scope of this
site but be aware its possible and do some more research. If
this is the case, form an LLC and elect to be taxed as an S-Corp.
Notwithstanding this, almost always you will be better off with a
LLC.
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