LLC vs. S Corporation: Which Is Right for You?
An LLC and an S corporation are not two competing entity types. Here is the distinction most business owners get wrong.
This question comes up constantly, and the framing is almost always off. An LLC is a legal entity you form with the State of Florida. An S corporation is not a separate entity type at all. It is a tax election you make with the IRS, and both an LLC and a corporation can make it, if they qualify. You are not choosing between an LLC and an S corp. You are choosing an entity structure, and then separately deciding how that entity is taxed.
What the LLC actually does
Forming a Florida LLC creates legal separation between you and the business. Done correctly, and maintained correctly, it limits your personal liability for business debts and claims. It also gives you flexibility in how the business is owned and managed, through an operating agreement that spells out who owns what, who makes decisions, and what happens if a member leaves.
What the S election actually does
By default, a single-member LLC is taxed as a sole proprietorship and a multi-member LLC is taxed as a partnership, both of which mean all profit passes through to the owners and is subject to self-employment tax. Electing S corporation tax status changes how that profit is taxed. Owners who are actively working in the business pay themselves a reasonable salary, subject to payroll tax, and remaining profit can be distributed without the same self-employment tax hit. This can produce real savings, but only once the business is profitable enough to justify the added administrative work: payroll, additional filings, and stricter recordkeeping.
The actual decision
The entity question and the tax question are both worth getting right, and they are worth getting right at the same time, because the operating agreement and the tax election interact. This is not a decision to make from a template. It depends on your income, how many owners are involved, and what the business will look like in two years, not just today.
One more thing worth knowing: the state approving your LLC name does not mean you own that name as a brand. That is a separate question, and we cover it in trademark vs. LLC.
Structure it once, structure it right.
Tell us where the business is today and we will tell you what actually makes sense.
