Answers · S corporations
LLC vs. S Corporation: What's the Difference?
LLC is a state-law legal form; S corporation is a federal tax status. An LLC can elect S taxation if eligible.
How it works
The rule, and what it turns on.
Entity choice should consider payroll, reasonable compensation, basis, ownership, state tax, benefits, financing and administrative cost.
Example
A single-member Texas LLC can remain disregarded or elect corporate/S tax treatment without ceasing to be an LLC under Texas law.
Common mistakes
What we see go wrong, and what we do instead.
- Treating LLC and S corp as mutually exclusive.
A better approach
- Compare the same legal entity under different federal tax classifications.
Authority
Where this comes from, so you can check it.
Treas. Reg. §§301.7701-1 through -3; IRC §§1361-1362.
Educational information, not individualized tax advice. Treatment depends on your facts, entity classification and tax year, and IRS instructions change. Confirm your own position with us before relying on it. Mint Associates does not provide legal services.
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