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Limited Liability Companies (LLC) are widely viewed as the most flexible entity structure from an ownership, management and taxation viewpoint. LLC’s offer limited liability protection with many of the advantages of proprietorship, partnership and S Corporations and without some of their inherent disadvantages. LLC profits are not taxed at the entity level, but rather profits are “passed-thru” and taxed only once at the member level.
S Corporations combine some of the advantages of a corporate structure with the “pass-thru” tax advantage of partnerships. “Subchapter S” is a reference to the tax code sections that distinguish the “S Corporation” from the traditional “C Corporation” under Subchapter C and by which income is taxed only once at the shareholder level, thereby avoiding the “double taxation” effect inherent in C Corporations. Before LLC’s, S Corporations were perhaps the most common form of ownership for smaller, privately-held corporations. S Corporations include certain shareholder and ownership restrictions that are not applicable to LLC’s.