S-corp vs. llc

Deciding between LLC, S corporation and C corporation encompasses a lot of issues. First, will you be the sole owner? If so, then you will likely decide between and LLC and an S corporation. A single-member LLC is known as a disregarded entity for tax purposes. Meaning that the income and expenses will be reported on Schedule C of your personal Form 1040. You will also be required to pay self-employment taxes on your net income. The LLC will pay no federal taxes.

As the shareholder of an S corporation, you will take a paycheck from the company for a reasonable salary. The remaining income will not be taxed at the corporation level, but instead will be reported on your personal Form 1040. You will pay payroll taxes on your paycheck, but not on the remaining amount.

There are several other important distinctions between S corporations and LLCs. You need to consult with a good CPA or tax attorney before deciding which entity to choose.