Which structure is best for a small online pastry business, an LLC or S-Corp?

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Which structure is best for a small online pastry business, an LLC or S-Corp?

I am having difficulties in picking the correct structure for my business. I will not have others working for me nor any partners. I need to know if registering WY as an LLC but filing as an S-corp to tax purposes better than just being a single member LLC for my new small pastry business. Which has a the best protection tax wise?

Asked on July 8, 2019 under Business Law, Georgia

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 1 year ago | Contributor

There is no difference for tax purposes between an S-corp and an LLC filing as an S-corp, partnership, or disregarded entity (different terms may be used): in both cases, there is no separate "corporate" taxes, but rather any profits (or losses, for tax deduction purposes) "pass through" the entity and drop directly to the owners tax return and so are only taxed once. You want to do this, rather than having "corporate" (e.g. c-corp) style taxation, where profits are taxed first at the entity level, then taxed again as income to the owner if and when he or she takes a distribution of them. 
Similarly, there is no difference in liability protection: both LLCs and S-corps will insulate their owners from most (but not all; no protection is perfect) business-related debts or liabilities. 
Therefore, there really is very little to choose from between S-corps and LLCs except that an LLC involves somewhat less paperwork and recordkeeping and formalities than an S-corp., making it somewhat the better choice.


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