An LLC can choose to be taxed as an S-corp or C corporation. In an LLC, members pay self-employment taxes directly to the IRS.
To become an S-corporation, a business must first register as a C Corp or LLC. After that, it must send the S Corp form to the IRS, indicating it wants S Corp tax status.
The main difference between LLC, C Corp and S Corp is the taxation structure. Can a business be an S Corp without being an LLC? An S corporation election lets the IRS know a business should be taxed as a partnership.
Tax Advantages of S Corporations
S corporations don’t pay corporate taxes. Income distribution to shareholders is only taxed once, at the individual level.
Choosing Between LLC and S Corp
Each corporation type has benefits, drawbacks and tax differences. An LLC tax structure is generally better than an S corp for holding rental properties.
How do I know if my LLC is S corporation or C corporation? Call the IRS Business Assistance Line.