Business owners often struggle with properly determining how to effectively and efficiently set up their overall business and tax structure.

Business owners often struggle with properly determining how to effectively and efficiently set up their overall business and tax structure. There are so many different terms out there, from “sole proprietorships” and “limited liability partnerships” to “corporations” and “limited liability corporations.” Knowing the difference between these different companies can help you determine the best route to take for your business. Here are some helpful key terms to know and the best way to distinguish between the two most commonly confused types of businesses — S corporations and LLCs. 

The Reason Why An S Corporation Would Want To Own An LLC

It can be challenging to know why an S corporation would want to own an LLC. Understanding the different nuances of an LLC and S corporation can prove tricky for a new business owner or entrepreneur. The reality is, people will typically desire a company that provides them with certain flexible options. That is precisely why business owners are leaning towards becoming LLCs. Ultimately, the different tax deductions from being an S corporation tend to be highly valued by business owners everywhere. That is why typically, consultants will encourage their clients to have an S corporation that owns an LLC for maximum benefits. 

Having An LLC WIth An S Corporation Election

There are so many different avenues you can take when it comes to starting your business. In fact, within an S corporation, payments and distributions are typically given to the partners proportionally based on their ownership percentage. The reality is, LLCs differ as they are not necessarily disbursed in the same manner. Instead, LLCs will typically disburse money to partners based on how the partners themselves deem appropriate.  

Bottom Line

Having the full knowledge about the difference between an S corporation and an LLC can help steer you towards the best type of business for your specific needs, goals, and desires. Being aware of the differences can help keep your aims in mind and allow you to be focused on all of your goals. 

Trust the Professionals at the Harding Group

Unlike other accounting firms, The Harding Group, located in Annapolis, MD, will never charge you for consultations and strive for open communication with our clients. 

Are you interested in business advising, tax preparation, bookkeeping and accounting, payroll services, training + support for QuickBooks, or retirement planning?  We have the necessary expertise and years of proven results to help. 

We gladly serve clients in Annapolis, Anne Arundel County, Baltimore, Severna Park, and Columbia. If you are ready to take the stress out of tax time, contact us online or give us a call at (410) 573-9991 for a free consultation. For more tax tips, follow us on FacebookTwitterYouTube, and LinkedIn

 

The post Tricky Business Questions: S Corporations and LLCs appeared first on The Harding Group.

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