Can you explain the difference between and LLC and S Corp and how to decide what's best for your business?

Hi Kalli! 

An LLC is easy to set up, by registering with your state for a fee. It is a pass-through entity which means that taxes are reported on your personal tax return (1040) via a Schedule C, so there’s no separate tax filing required as an LLC. It provides you with limited liability protection as opposed to a sole-proprietor or DBA (Doing Business As). You’re responsible for self-employment taxes as well as income taxes on your business’s net income, if that’s a substantial amount, this is usually when electing to be treated as an S-Corp is considered. 

An S-Corp is not a business entity, instead it’s just a designation given for tax purposes. An LLC elects to to treated as an S-Corp by the deadline (March 17, 2025 for 2025 tax year, it’s not retroactive) and begins to operate as one. The biggest advantage with becoming, or better yet, electing to be treated as an S-Corp, is the tax break. You would pay yourself a reasonable salary (subject to payroll taxes) 
and then any additional profits you take as distributions are not subject to self-employment taxes (only income tax). This is usually a right move to make when the tax savings outweigh the payroll requirements and financial obligations as you will also need to file a separate business tax, keep accurate financial records, and more detailed paperwork which may mean higher payroll, bookkeeping, and accounting fees year-around so it’s important to make sure it’s the right decision for you. 

Be sure to register for our February 26th webinar all around this topic!