Choosing between incorporating a business as an S corp or an LLC can be tricky. Both companies have their similarities - and differences - which can often make deciding between the two a difficult task. And when each state's rules and regulations come into play, it only adds to the confusion.
Structuring a small business as an LLC or an S corp allows a business owner to protect his or heir personal assets from a business creditor.
means you can't be financially responsible for more than your investment in the company," writes Greg McFarlane in his book, Control Your Cash: Making Money Make Sense, Inc. magazine reported.
"If you put in $10,000, and incur $11,000 in debt, you're only potentially liable for $10,000. Your creditors (check that, your LLC's creditors) can't 'pierce the corporate veil,' as the phrase goes," he added.
An LLC and S corp both help a person avoid paying personal and corporate taxes. The difference in an S corp, however, is that owners pay themselves a salary and receive dividends and additional profits. An LLC, however, is a "pass-through entity," meaning that all income and expenses are reported on the LLC operator's personal income tax return.
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