When starting a Scottsdale business, owners will consider either a limited liability company (LLC) or a subchapter S corporation (S-corp). Both of these are very popular business entities, but which one is right for you? Listed here are a few differences between the two to help you decide which one will better serve you.
1. An LLC is a structure that is similar to a sole-proprietorship or a general partnership. An LLC is designed to provide a Scottsdale business the limited liability options of a corporation and the tax efficiencies and flexibility of partnership.
2. A Scottsdale company’s limit of liability is the amount that the owner has invested into the company.
3. With an LLC, there are fewer forms to fill out in order to register your Scottsdale business and less start-up cost compared to an S-corp. However, a downfall to an LLC is when the owner dies or happens to go bankrupt, the LLC is gone or dissolved.
4. If you as a Scottsdale business owner decide to go with an LLC, you will be considered self-employed, which then means that you will be required to pay certain percentage of self-employment tax towards Medicare and social security.
5. In order to obtain an S-Corp, your business will need to be recognized as a corporation in the state you are requesting an S-Corp and the start-up costs are higher than an LLC.
6. Shareholders are owners of an S-Corp.
7. With an S-Corp, if a shareholder dies or chooses to leave the company, the S-Corp, will be able to continue without any problems.
Deciding on what kind of business structure is right for you can be confusing and overwhelming. There is a lot more to know when it comes to choosing a Scottsdale limited liability company or a Scottsdale subchapter S corporation. There is also a lot to consider when deciding between the two, such as number of employees, stock options, and state and federal tax requirements. The needs of every business are different so it is important that if you are unsure as to which entity to go with, that you meet with an attorney to help go through the pros and cons of each and how they would effect you and your business.
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