Llcs Versus S Corporations

http://cpajournal.blogspot.com/ 1. LLCs Vs. S Corporations 2. ENTITY COMPARISON TABLE

LLCs Vs. S Corporations Number of Owners Nature of the Owners

S Corporation No more than 75. All shareholders must consent to the election at the time it is made Individuals, US citizens or permanent residents. decedent's estates, bankruptcy estates, certain trusts, charitable organizations and certain qualified plan trusts.

Nature of Management

Managed by board of directors and officers

Nature of Ownership

Single class of stock

LLC No maximum limit. In some states at least 2 members are required. All S Corporation eligible owners, plus, non-residents, corporations, limited or general partnerships, most trusts, and pension plans. Can be managed either by the owners (Member-Managed) or by one ore more Managers (ManagerManaged). Different classes and priorities of ownership are allowed.

http://cpajournal.blogspot.com/ ENTITY COMPARISON TABLE Here is a comparison table among different types of business structures. Please notice that only LLCs and Corporations are chartered entities. S Corporations are not a special business entity. They are general corporation that have adopted an special tax treatment.

http://cpajournal.blogspot.com/ Characteristics Formation Duration Liability Simplicity of Operation Management Taxation Pass Through Income/Loss Double Taxation Cost of Creation Raising Capital

General Partnership Agreement of parties involved. No permission required Dissolved by death of partner or bankruptcy

LLC

S Corp

Corporation

File with state for permission

File with state for permission

File with state for permission

Typically limited to a fixed amount of Perpetual time

Shareholders are typically not personably liable for the debts of the corporation Formality of board of Formality of board directors, of directors, officers, officers, annual annual meetings and meetings and annual reporting annual reporting The corporation is The corporation is managed by managed by the the board of board of directors directors who who are elected by are elected by the shareholders the shareholders

Shareholders are Members not typically not Partners have typically liable for personally liable unlimited liability the debts of the for the debts of the LLC corporation

Relatively few legal requirements

Some formal requirements but less formal than corporations

Typically each Members have partner has an operating equal voice unless agreement that otherwise outlines arranged management

Transferability of Interest

Perpetual

Each partner pays If properly tax on his/her structured there is No tax at entity share of the no tax at the entity Corporation level. Income / loss income and can level. Income/loss is a taxable is passed through to deduct losses is passed through to entity. the shareholders against other members of the sources of income LLC No, corporate losses can't Yes Yes Yes be deducted by shareholder No No No Yes Filing fee with the Filing fee with the Filing fee None

http://cpajournal.blogspot.com/

Source: http://www.activefilings.com