LLC |
C Corp |
S Corp |
|
|---|---|---|---|
| Filing requirements | Articles of organization, along with any filing fees. | Articles of incorporation, along with any filing fees. | Articles of incorporation, along with any filing fees. Form 2553 will also need to be filed with the IRS. Finally, a few states require a state-level S Corp form. |
| Ongoing requirements | Annual reports and/or fees. The Wisconsin Department of Financial Institution’s fee schedule is Here. | Annual fees, annual reports, annual meetings and formal recordkeeping requirements. | Must follow general corporate rules, but also needs to keep meeting the requirements for converting to an S-Corp via Form 2553. |
| Ownership | Owned by its members. Each member holds a membership interest in the company that gives them certain rights and privileges. | Owned by its shareholders. Shareholders have varying degrees of ownership depending on the stock they hold. | Owned by its shareholders. Shareholders have varying degrees of ownership depending on the stock they hold. |
| Ownership restrictions | No major restrictions on who can be an owner. | No major restrictions on who can be an owner. | Can have a maximum of 100 shareholders, who must be US citizens or resident aliens. Cannot be owned by another business. |
| Company management | Either managed by its members (owners) directly or by managers who have been appointed by the members. | Uses a threefold management system, consisting of shareholders, a board of directors, and corporate officers. | Uses a threefold management system, consisting of shareholders, a board of directors, and corporate officers. |
| Governing document | The operating agreement. It outlines what an LLC can do, and explains the roles of members and managers. | A Corporation should have bylaws to explain how the corporation should run and explain the responsibilities of shareholders, directors, and officers. | S Corps should have bylaws which explain how the corporation should be run, as well as the responsibilities of shareholders, directors, and officers. |
| Fundraising | Can sell ownership interests in the company to raise funds. However, this usually requires the consent of all existing members and can have significant business implications. | May sell multiple types of stock to raise funds, such as common stock and preferred stock. | May sell a single type of stock to raise funds, but ownership rules apply to any potential buyers. |
| Taxation | Taxes “pass through” to the owner by default. But an LLC can elect to be taxed as a corporation, and pay taxes directly. | Pays most taxes as a corporation. However, dividends are taxed twice: once at the corporate level, and then again at the shareholder level. | Has “pass-through” taxation, which means that the shareholders pay taxes, rather than the business itself. |