LLC vs. S-Corp

Written By John Kim

A Guide for Small Business Owners Choosing a Legal Structure

If you're starting a business or already running one, you've probably wondered:
“Should I stick with an LLC, or is it better to switch to an S-Corp?”

Both are popular choices for small businesses, but they differ in how they’re taxed and operated.
So depending on your situation, one structure might be more beneficial than the other.

✅ What Is an LLC?

An LLC (Limited Liability Company) is a flexible and easy-to-form business structure. It protects your personal assets from business liabilities, and for tax purposes, profits are generally passed through to your personal return.

Pros:

  • Simple formation and management

  • Multiple tax filing options

  • Flexible profit distribution

Cons:

  • Self-employment tax applies to all net income

✅ What Is an S-Corp?

An S-Corp is not a business type, but a special tax election made through the IRS. You typically form a Corporation or LLC, then file IRS Form 2553 to be taxed as an S-Corp.

Pros:

  • Portion of net profit (as distributions) is not subject to self-employment tax

  • Great for tax savings if you’re making higher profits

  • Adds credibility to your business

Cons:

  • You must pay yourself a reasonable salary

  • More complex bookkeeping and compliance

🔍 When Is S-Corp a Better Option?

  • When your net income exceeds $40,000/year

  • If you're looking to reduce self-employment taxes and build credibility

  • If you're working with a CPA who can help plan reasonable salary and distribution

🧾 How KOAM CPAs Can Help

Electing S-Corp status isn't just about filling out a form — It requires strategic timing, the right paperwork, and careful evaluation of your business's income structure.

At KOAM CPAs LLC, we offer:

  • ✅ Personalized analysis of LLC vs. S-Corp

  • ✅ Filing of IRS Form 2553 & PA REV-1647 (for state recognition)

  • ✅ Salary/distribution strategy and tax planning

  • ✅ Full support for tax filings and ongoing accounting

📞 Schedule a Free Consultation for 30 minutes

Still unsure whether an LLC or S-Corp is right for you?
Let KOAM CPAs provide professional advice based on your real numbers and future plans.

👉 Request a consultation at  www.koamcpallc.com
☎️ 215-917-0964 | ✉️ Support@koamcpallc.com

John Kim
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