By Lia Szasz, Esq.
Two of the most popular entities chosen by entrepreneurs when forming a new business are the corporation and the limited liability company. Both entities offer protection against personal liability for their members or shareholders, but there are many other considerations to determine which form of entity is best for that particular business. For example, one benefit of LLCs is that they are “pass-through” entities, meaning their income is subject only to one level of taxation at the member level. In contrast, the income of a corporation is effectively taxed twice—once as income of the corporation and again when profit is distributed to the shareholders. Corporations, however, may save their shareholders self-employment tax, whereas members of an LLC are generally subject to self-employment tax on their share of the LLC’s ordinary income distributed to them.
