Because protecting personal assets from liability is an important consideration when starting a new business, many self-employed real estate investors organize their companies as a type of corporation or limited liability company (LLC). Two common choices among small business owners are S corps and series LLCs.
I help my clients set these up to protect their assets, plan their estates, and help avoid paying unnecessary taxes. While your unique situation may call for a customized approach, I’ve put together this quick guide to help you decide whether an S corp or series LLC is the best business structure for your new venture.
S Corporations and Series LLCs: What Are the Differences?
While there are many similarities between S corps and series LLCs, there are some critical differences between the two options.
Tax Status vs. Entity Type
The S corporation, or S corp for short, is not a type of legal entity but a tax status that the IRS can grant a corporation. On the other hand, series LLCs are a type of business entity created by state law.
Fun side note: LLCs can also choose for the IRS to tax them as S corporations. For this guide, I decided to focus on corporations with S corp tax status.
Shareholders vs. Members
Since S corps are corporations, they are owned by shareholders, whereas series LLC owners are called members. The IRS places the following restrictions on S corporation ownership:
An S corporation cannot have more than 100 shareholders.
S corp shareholders must be U.S. citizens or residents.
An S corp cannot be owned by LLCs, corporations, partnerships, or many types of trusts.
Conversely, series LLCs can be owned by an unlimited number of members and can have unlimited subsidiaries and series.
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