Chapter 5) How to form a Business - Assignment Example

S Corporation versus Limited Liability Company" By 02 April 02 April " S Corporation versus Limited Liability Company "The two most widely used form of corporation used to form new businesses is the S Corporation and Limited Liability Company (LLC). The two forms of corporation share some similarities and differences that are discussed as follows:Similarities:They both are separate legal entity as per the IRS principles thus providing protection for the personal assets. Both the corporations avoid double taxation and work on the single taxation mode.

Differences:In terms of differences the number of owners differ in S Corporation as compared to LLC. In an S Corporation the number of owners are 100 whereas in an LLC the number of owners is unlimited. It is mandatory for the S Corporation to be owned by citizen or US resident. However the LLC has the liberty to be owned by the Non-US residents. Also in terms ownership of the S Corporation cannot be owned by other organizations but LLC can be owned by other LLC. In terms of functioning, the LLC is not required to have mandatory meetings and minutes but S Corporation is required to have mandatory meetings and is involved in several administrative tasks.

The board of directors forms the part of an S Corporation however the LLC is bared from the board of directors’ setup. In terms of the transfer of ownership S Corporation can simply sell its shares to do so but the LLC has a difficult procedure in terms of ownership transfer. Thus LLC is more flexible and has less administrative task as compared to S Corporation that is more administratively proper.Unlimited Liability:It is a type of business where the owners share the entire amount of debt and other liabilities.

The liability of the owners of not linked to their investments and they share the entire brunt of the business’s debts and other liabilities.