S corps can have no more than 100 shareholders, may not have non-U.S. Unlike LLCs, which can have an unlimited number and type of owners, S corps are subject to strict ownership rules.Assuming an LLC doesn’t make an election to be taxed as a corporation, both LLCs and S corps are pass-through tax entities, allowing business profits and losses to flow through and be reported on the owners’ personal tax returns.Both entities provide owners with limited liability, meaning your personal assets are protected from your business creditors’ claims.Unlike a sole proprietorship or a general partnership, the LLC and S corp are not recognized under state law until the filing has been made. Both entities are created by filing the necessary paperwork with the state.There are similarities and differences between LLCs and S corps that business owners should understand before choosing between these two entities. Among the decisions that new business owners grapple with is whether to form a limited liability company (LLC) or an S corporation (S corp). Hanging a shingle starts with an idea that develops into a business plan, but not without careful financial and legal considerations. Entrepreneurship has been called the new American dream.
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