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S Corp questions
I’m opening up a catering company that offers catering platters and single meals. We will also have food booths at fairs and festivals. If I choose S-Corp. Can my husband and I be the only shareholders and responsible parties?
Asked on November 15, 2017 under Business Law, California
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 6 years ago | Contributor
Yes, you can be: an S-corp can have only two related shareholders (or even only one shareholder, for that matter).
An S-corp. is a very good option. An LLC (limited liability company) is as good and *may* be fractionally better. They both offer the same protection from personal liability against company debts or obligations which you do not personally guaranty. Assuming you select "pass through," "disregarded," or "partnership" tax treatment (terms vary) for the LLC when you set it up, it has the same tax treatment as an S-corp.
An LLC generally involves slightly less paperwork and reporting than an S-corp., and if you later decide to bring anyone else in (e.g. a parent, sibling, child, etc.), gives you a bit more flexibility in assigning economic rights vs. power/authority: in a corporation, including S-corp., economic participation and power are generally linked, but with an LLC, you can give a "member" more economic participation and less power, or vice versa--whatever you decide and put into the operating agreement.
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