Frequently Asked Questions

How does transferability of ownership differ between an S corporation and an LLC?

The transferability of ownership is one of the key differences between an S corporation and a Limited Liability Company (LLC). In an S corporation, the stock can be freely transferred, providing a level of flexibility for the owners. This means that the shareholders can sell their shares without any restrictions, making it easier for them to liquidate their investment or bring in new investors. On the other hand, the ownership in an LLC is usually not freely transferable. The transfer of ownership must be approved by a majority, or in some cases, all members of the LLC. This is typically outlined in the LLC Operating Agreement. This means that if an LLC member wants to sell their interest in the company, they must first get the approval of the other members. This can potentially limit the ability of the members to sell their interest and can make it more difficult to bring in new investors.