Frequently Asked Questions

How does the management structure differ between an LLC and an S corporation?

The management structure of an LLC (Limited Liability Company) and an S corporation significantly differs. In an LLC, owners, also known as members, can choose to operate a member-managed or manager-managed LLC. In a member-managed LLC, the structure operates similarly to a partnership, with members involved in the daily operations and decision-making processes. Conversely, in a manager-managed LLC, the structure resembles a corporation, with members only involved in significant business decisions, not the daily operations. On the other hand, an S corporation operates under a more formal structure, with a board of directors and officers. The board of directors oversees the daily operations and handles all major decisions. For the daily operations, the board hires officers who manage these tasks. It's important to note that there are several formalities regarding the ongoing maintenance of an S corporation, including the adoption of bylaws, issuing of stock, conducting annual shareholder meetings, and keeping meeting minutes. In contrast, the formalities for an LLC, such as the adoption of an operating agreement and issuance of membership shares, are not requirements but are recommended by most states.