Frequently Asked Questions
What are the formalities required for the ongoing maintenance of an S corporation and an LLC?
The ongoing maintenance of an S corporation and an LLC involves several formalities. For an S corporation, these include the adoption of bylaws, issuing of stock, conducting annual shareholder meetings, and keeping meeting minutes. These are necessary steps to ensure the smooth operation of the corporation and to meet legal requirements. On the other hand, the formalities for an LLC are slightly different. They include the adoption of an operating agreement (although this is not required in most states), issuance of membership shares (also known as distributive shares), having periodic or annual meetings, and documenting all significant decisions. It's important to note that these are not requirements, but rather recommended formalities by most states. The differences in these formalities reflect the different structures and operations of S corporations and LLCs. For instance, S corporations have a more rigid structure with a board of directors and officers, while LLCs can be either member-managed or manager-managed, offering more flexibility. Furthermore, the transferability of ownership also differs between the two. S corporation stock can be freely transferred, while the ownership in an LLC is usually not freely transferable and must be approved by a majority (or all) members in the LLC.
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