LLC or S Corp? How to Choose the Right Structure for Your Business
LLC or S Corp? It’s one of the first decisions you’ll make when forming your business—and one that impacts taxes, growth, and how you get paid. Here’s how to decide.
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LLC or S Corp? Here's How to Choose the Right Structure for Your Business
One of the first decisions founders face when starting a business is how to structure it.
And one of the most common questions I get is:
“Should I form an LLC or elect S Corp status?”
The answer? It depends—on your revenue, goals, and how you want to get paid.
Here’s a straightforward breakdown to help you decide what makes sense now (and how to stay flexible as you grow).
✅ What Is an LLC?
An LLC (Limited Liability Company) is a legal business structure that separates your personal assets from your business. It’s simple, flexible, and often the first choice for solopreneurs, consultants, and small teams.
Benefits of an LLC:
Simple to form and operate
Pass-through taxation (no separate business taxes)
Fewer rules than corporations
Can have one or multiple owners (members)
Downside?
You’ll pay self-employment tax on all your profits, and depending on your state, LLC fees can add up.
✅ What Is an S Corp?
An S Corporation isn’t a legal business structure—it’s a tax status you can elect through the IRS (via Form 2553) once you’ve set up an LLC or corporation.
Why elect S Corp status?
To save on taxes. With an S Corp:
You can pay yourself a reasonable salary
Any profit beyond that is paid as distributions, which are not subject to self-employment tax
You still get pass-through taxation (like an LLC)
But:
You’ll need to run payroll
You must file separate business tax returns
The IRS may audit your “reasonable salary”
All shareholders must be U.S. individuals (no entities)
🧠 Which One Should You Choose?
Here’s a quick reference:
ScenarioBest FitJust starting out, under ~$75K profit, solo or small teamLLCYou’re consistently profitable and want to reduce taxesLLC taxed as an S CorpYou’re raising venture capital or planning to scale fastConsider a C Corp (especially in Delaware)
🔁 Can You Switch Later?
Yes. You can start as an LLC and elect S Corp taxation later (as long as you meet IRS requirements). This gives you the flexibility to keep things simple early on and optimize taxes once the revenue justifies it.
💬 How Elementum Helps
We work with founders at every stage—from setup to scale—and help you:
✅ Choose the right structure for your goals
✅ Connect with vetted tax and legal partners
✅ Set up bookkeeping and financial systems that support growth
✅ Plan for what’s ahead, not just what’s urgent now
We bring clarity, so you can focus on building.
Foundation First. Future Focused.
Choosing the right structure early on can save you time, money, and headaches later.
Not sure what makes sense for your business? Let’s figure it out—together.
📬 Contact@elementuminsights.com
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