Legal Question in Business Law in Florida

Re: Sub-S Corp.vs.LLC in Florida

A Sub-S corporation is a classification by the IRs that permits the corporation to have only one class of stock and, for the most part, the income and deductions flow through to the share holders in proportion to the number of shares held.

An LLC is more like a hybrid between a Sub-S corporation and partnership. To the outside world you are essentially treated like a corporation. However upon incorporation, you make an election to to be teated and taxed as if you were either a partnership or Sub-S corporation. In addition, the LLC provides asset/creditor protection that a Sub-S does not.

The decision to pick one form of LLC over Sub-S usually depends upon the nature of the business to be transacted and the planned capital structure of the venture. This is due to the differences in tax treatment, owner participation in management and personal preferences. It is worthwile to discuss this with a business/tax attorney before incorporating as unwinding abusiness to change to a more appropriate form can trigger immediate recognition of gains (and taxes). It is OK to call if you need more info.

Re: Sub-S Corp.vs.LLC in Florida

Sub S is a IRS classification for a corporation that requires compliance with various conditions just to be treated like a partnership. An LLC can be treated like a partnership for tax purposes without the complicated requirements. I can assist you with all aspects of your new business.

Re: Sub-S Corp.vs.LLC in Florida

NOTE: This communication is not intended as and should not be interpreted as legal advice. Rather, it is intended solely as a general discussion of legal principles. You should not rely on or take action based on this communication without first presenting ALL relevant details to a competent attorney in your jurisdiction and then receiving the attorney's individualized advice for you. By reading the "Response" to your question or comment, you agree that the opinion expressed is not intended to, nor does it, create any attorney-client relationship, nor does it constitute legal advice to any person reviewing such information, nor will it be considered an attorney-client privileged communication. If you do not agree, then stop right here, and do not read any further.

Frankly, I have asked and researched the same question myself many times. The best I have been able to figure out is that the LLC allows the ownership by foreigners to have similar tax consequences as American citizens where a corporation would not. I generally steer my clients to a corporation which is cheaper and easier to incorporate and far less complicated to understand for most individuals unless their particular situation dictates otherwise.

A corporation will have elected officers and shareholders. Individual owners get shares of stock in the corporation. An LLC has a managing member and all other individuals with an ownership interest are members. It is far simpler (and cheaper) to transfer shares of stock than drafting complicated legal instruments to transfer a membership interest in an LLC.

Scott R. Jay, Esq.