S Corporation vs. LLC: Which Structure Is Better for Tax Planning?
S Corporation vs. LLC: Which Structure Is Better for Tax Planning? When choosing the right business structure, two popular options often come into consideration: the S Corporation (S Corp) and the Limited Liability Company (LLC). Both structures provide distinct benefits, particularly when it comes to tax planning, but they also come with their own sets of challenges and limitations. Understanding the key differences between these two entities and how they affect tax planning can help entrepreneurs make the best decisions for their businesses. S Corporation: Tax Benefits and Considerations An S Corporation is a special type of corporation that allows income, deductions, and credits to pass through to shareholders’ tax returns. This structure avoids double taxation, which is a common issue with traditional C Corporations. S Corps are subject to strict eligibility requirements, including limitations on the number and type of shareholders. One of the most significant tax advantages of an ...