Business owners–and even attorneys and accountants–can get twisted up in the debate over which is best, the LLC or the S corporation. But it’s not necessarily an either/or proposition. Rather, you can set up an LLC first, and later elect to have the LLC treated as an S corporation. If your LLC operates an active trade or business, and payroll taxes (SECA taxes) on the owner or owners are high, you may find that an S corporation election is the best choice.
Both organizational forms share the characteristic of “passing-through” their income to the owner(s). Both also provide their owner(s) limited liability protection. But each has some distinguishing features, too. You, as a new business owner, will want to consider the differences as you choose the form for your enterprise.
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About The Grady Firm, P.C.
The Grady Firm, P.C. attorneys specialize in helping businesses grow and succeed through employment, business, and immigration law advising for clients in California. They help perform personnel audits, draft/revise Employee Handbooks, train employers on employment law compliance, provide on-demand legal analysis for hiring and firing questions, and provide leadership and sexual harassment training in English and Spanish.
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*This article is for informational purposes only, and does not constitute legal advice or create an attorney-client relationship. This article does not make any guarantees as to the outcome of a particular matter, as each matter has its own set of circumstances and must be evaluated individually by a licensed attorney.