S-Corporations vs. Limited Liability Companies

The Limited Liability Companies continues to be the most popular entity today due to its many advantages. The owners of both an LLC and S Corporations have limited liability and both entities can be taxed as either a proprietorship or partnership. An LLC member's risk is also limited to his loss of investment. However, a major protective advantage of the LLC over the S corporation is that the LLC affords you more ownership options. For example, your LLC can be owned by anyone or any entity including a family limited partnership (FLP), a trust, another corporation, etc. S corporation shares cannot be owned by these entities. Their stock ownership is restricted to individuals or specialized trusts. Thus, it is much more difficult to protect an S corporation than it is an LLC. Another advantage of the LLC is that you can integrate your Estate Planning.

More importantly, an ownership interest in an LLC is considerably more creditor protected by State Law than are shares in an S corporation which can be easily seized by a stockholder's personal creditors. A member's interest in an LLC is creditor protected in the same way a partnership interest in a limited partnership is protected. A member's personal creditor is limited only to a charging order against the LLC interest, which gives the creditor only the right to receive distributed profits due the debtor partners.

There are still a few advantages of an S corporation over an LLC: (1) S corporation owners pay employment taxes only on their salaries, while LLC owners pay employment taxes on all profits; and (2) State taxes may be lower for an S corporation.

To discuss the best entity for your business, contact The Presser Law Firm, P.A. for a complimentary preliminary consulation today.

The Presser Law Firm, P.A.
6199 N. Federal Highway, Boca Raton FL 33487
(561) 953-1050 or e-mail Info@AssetProtectionAttorneys.com