Tricky Business Questions: S Corporations and LLCs
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.
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.
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