LLC or S-Corp, these tend to be the options of choice by most small business operators. If consulting an attorney the choice is an LLC, if an accountant the preference is usually an S-Corp, or an LLC with an S-Corp election. If this is on the table I prefer the straight approach of an S-Corp.
Both options are flow through entities. The LLC profit is taxed for self-employment income, an S-Corp the owner needs to have a reasonable salary. An S-Corp also needs to maintain corporate books and records. I encourage all businesses to have and maintain corporate books and records, even LLC’s; these should include the measurable goals and strategies that should be reviewed regularly.
I have argued with attorneys that they prefer LLCs for the organization fee and for the Operating Agreement preparation. So they get two sales from the client, they typically argue for the simplicity of the maintaining and no responsibility for the corporate books and records as the rationale. This is based on the belief that clients don’t like or will not keep the records up to date, essentially weakening the corporate veil.
From a tax perspective an S-Corp has financial benefit, after the salary the profits are taxed at the ordinary income levels. An LLC is taxed at the ordinary income level, but the profit is also subject to the self-employment taxes. If the S-Corp election is processed the LLC reports taxes as an S-Corp.
If you are looking to incorporate or organize a business give a call to discuss all options to see what might be appropriate for your needs.