If you’re looking to start a business in Florida and aren’t sure which type to become, terms like LLC and S Corp can sound confusing. Make sure you know the differences between both before starting a new business registration.
LLC Advantages
- LLC means “Limited Liability Company,” which provides limited liability protection to owners (or members).
- Only file a business tax return if the company has more than one owner.
- Pass-through taxation: No taxes paid at the business level; income and loss are reported on the owner’s personal tax returns and any tax due is paid at the individual level.
- Unlimited number of members.
- Owners are not personally responsible for business debts and liabilities of the LLC, which means creditors cannot pursue the personal assets of the owner(s) to pay business debts.
- Can be owned by other corporations, including S Corporations, C Corporations, LLCs, or certain types of trusts and partnerships.
- While not required, documenting meetings and minutes are strongly encouraged.
- Ownership is not freely transferable, as approval is usually required.
- Can have different membership classes and flexibility in company management.
S Corp Advantages
- Must file a business tax return, Articles of Incorporation, and pay taxes and fees that are associated with filing and operations.
- Ownership restriction from the IRS, including: U.S. citizen-only business owners and shareholders; cannot have more than 100 shareholders.
- Owners who work for the business are employees and therefore offered self-employment tax savings.
- Must have directors and officers (a board of directors) that supervise significant decisions and affairs of the company but do not handle daily operations.
- Board of directors elects managers who handle the daily business operations.
- Must have bylaws, hold shareholder and board of director meetings, as well as keep meeting minutes for public record.
- Stock in S Corp is freely and easily transferable.