Frequently Asked Questions

What are the differences between an LLC and S corporation in terms of ownership and management?

The differences between an LLC and an S corporation primarily lie in the areas of ownership, management, length of existence, transferability, and self-employment tax. In terms of ownership, S corporations are restricted to a maximum of 100 owners, whereas LLCs can have an unlimited number of members. Non-U.S. citizens can be members of LLCs, but cannot be owners of S corporations. When it comes to management, LLC owners have the flexibility to operate as a member-managed or manager-managed LLC. In contrast, S corporations have a more structured management system with directors and officers. The board of directors oversees the daily operations and major decisions, while officers manage the day-to-day operations. The length of existence also differs between the two. An S corporation can exist indefinitely, while some states require LLCs to identify a dissolution date. Transferability of ownership is another key difference. S corporation stock can be freely transferred, while the transfer of ownership in an LLC usually requires approval from a majority or all members.