By isolating the business from the individual owner(s), an LLC adds another layer of security for the business and its owners.
An S Corp, a particular kind of corporation that offers the same level of legal protection as an LLC but typically produces higher tax savings, may only be created by U.S. citizens and resident aliens. It also has some additional restrictions, making it perhaps not the best choice for partnerships or businesses with investors.
Here’s the shortcut guide:
You’ll want to be an LLC if:
1. You are a foreign owner
2. You need to split the investment and profits differently than the ownership percentages
3. You know for sure you’ll be raising money from equity investors
4. You are adding another entity to own an account under a parent business
5. You already are an LLC and just want to choose the S Election for tax purposes
6. You’ll want to be an S Corp if:
You are a U.S. citizen or resident alien
1. You are a sole owner or partner with equal contributions
2. You pay for your own health insurance
3. You haven’t formed anything yet so you can go straight to being an S Corp
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