Choosing the right structure for your business can affect how you’re taxed, how you pay yourself, and your ongoing filing requirements.
One common source of confusion is the difference between an LLC and an S corporation. They aren’t necessarily competing choices. An LLC is a legal business structure, while S corporation status is a tax election. In fact, an eligible LLC can elect to be taxed as an S corporation.
Why Consider an LLC?
An LLC can provide liability protection while offering flexibility in how the business is managed and taxed. Nebraska LLCs are formed by filing a Certificate of Organization with the Nebraska Secretary of State.
Why Consider S Corporation Taxation?
An S corporation generally passes income, losses, deductions, and credits through to its shareholders. For some business owners, an S corporation election may also provide tax-planning opportunities.
However, S corporation owners who work in the business generally must pay themselves reasonable compensation before taking non-wage distributions. Payroll and additional filing requirements also need to be considered.
Which Is Right for Your Nebraska Business?
There isn’t one structure that’s right for every business. Your income, number of owners, payroll needs, future plans, and tax situation can all influence the decision.
Boone & Associates can help Nebraska business owners understand the tax implications of different business structures and determine when an S corporation election may be worth considering.
This information is intended for general educational purposes and should not be considered individualized tax or legal advice.