Question

Business Law

Why would an entrepreneur choose an LLC or S-Corp?

Answer 1

An entrepreneur will prefer LLC or S-Corp on the basis of their advantages over the other one.

Some of the advantages that LLC offers over S-Corp are-

1. Flexibility- limited liability Company is comparatively flexible when it comes to the gains distribution. It does that faster than S-CORP.

2. Number of members- LLC can have unlimited members in it. There’s no as such restriction imposed on the limited liability company. S-Corp can have maximum 75 members.

3. Ownership- LLC can be owned by anyone. While S-Corp cannot be held by Non-US citizens.

Some of the advantages that S-Corp offers over LLP are-

1. Ownership- S-Corp can be owned by 1 individual whereas for the formation of LLP, minimum 2 members are required.

2. Transferability- the ownership of S-Corp can be transferred to any other person without the permission of any other existing shareholders but this is not possible in LLC.

3. Life- S-Corp has a larger life than LLP. LLP generally exists for a shorter period of time that too declared beforehand.