When setting up a new business or considering how to make your current business the best it can be, you have multiple options. One of the most important decisions to make is which legal entity to choose. In the past, S corporations have been the small business’ preferred legal entity. However, the recent advent of the limited liability company (LLC) has generated a great deal of interest about this newer legal entity. Why? Many advantages exist to operating a business as an LLC.
- S corporations are limited to 100 shareholders; but there are no restrictions on how many members may be part of an LLC.
- S corporations are limited to a single class of stock; whereas an LLC may have an unlimited number of membership classes.
- S corporations cannot have a shareholder other that an individual, qualified estate or trust. LLCs can have members that are corporations, partnerships, LLCs or unincorporated entities
- S corporations cannot have shareholders who are nonresident alien individuals; whereas LLCs can have non US residents.
- LLC members are not susceptible to a “piercing the corporate veil” attack solely as a consequence of the members’ failure to satisfy certain administrative formalities such as annual meetings and election of Board of Directors.
Are you setting up a new business or want to evaluate the financial effectiveness of your current business model? Give us a call. We can help you determine the right business entity for your business.