All Corporations start out as a regular Corporation. By filing form 2553 with the IRS you are electing to meet the requirements for an S-Corporation. Essentially, an S-Corporation is treated like a Partnership for tax purposes, but it has all the limited liability protection of a regular Corporation. S-Corporations, however, do not have many of the fringe benefits that regular Corporations do.
Tax:
An S-Corporation is a pass-through entity. This means profits and losses pass through to the shareholders.
Asset Protection:
An S-Corporation provides the same liability protection as a regular C-Corporation.
Quick Benefits List:
Disadvantages:
There are certain restrictions that must be met to qualify as an S-Corporation:
The following table provides a look at the LLC vs Corporation, and LLC vs S-Corporation. Tax comparisons can be found in the lower portion of the table.
 |
C-CORPORATIONView the Details Incorporate Now |
LLCView the Details Incorporate Now |
S-CORPORATIONView the Details Incorporate Now |
|---|---|---|---|
| Type of Organization |
Stock, there may be different classes. |
Membership interests. There may be different classes of membership. | One class of stock. Which may be voting or non-voting. |
| Eligible Owners | No restrictions. | No restrictions. | 100 shareholder limit. No non-individual and no non-resident alien shareholders. |
| Management | Managed by director(s) and officer(s). | Two Management Types - Managed by Manager - Managed by Members |
Managed by director(s) and officer(s). |
| Allocations of Ownership | None. Dividends must be paid based upon stock ownership. | Permitted if the allocations have substantial economic effect. | None. Income, gain, and loss pass-through to the shareholders based on the percentage of shares owned. |
| Liability Protection | There is limited liability for shareholders, officers and directors. | There is limited liability for members and managers (if applicable) | There is limited liability for shareholders, officers and directors. |
| Duration | Perpetual | Dissolves at the time specified in the Operating Agreement or upon the loss of a member unless other members agree to continue. | Perpetual |
| Transfer of Ownership | Shares freely transferred. | There may be restrictions under certain state laws. | Shares can be transferred only to eligible S-corporation shareholders |
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