Which form of business structure should I use?

UPDATED: Oct 1, 2022

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Which form of business structure should I use?

I am starting an online store owned by currently just myself. Eventually I may
have an additional owner or 2, but it is currently just myself. What type of
structure should I chose either LLC or S Corp.

Asked on November 14, 2017 under Business Law, Texas


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 5 years ago | Contributor

There is very little to choose between among an S-corp. and an LLC.
1) Both provide the same liability protection to the owner(s) personally as against most business debts, liability, and obligations.
2) Both give you the same "pass through" (no double taxation) tax treatment (select "partnership," "disregarded," or "pass through"--terms may vary--treatment when you set up the LLC.
3) The LLC involves less paperwork and reporting formalities than an S-corp.: no need for annual "meetings," for example. That is one advantage.
4) If you bring in other people later, an LLC gives you more flexibility about assigning economic interests vs. power or control: those two things are more closely linked in S-corps, so that power generally equals ownership. With an LLC, you can mix and match more.
So an LLC is probably slightly better, but it is not a large difference.

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