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WiseOwl58, Attorney
Category: Business Law
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Experience:  Experienced business lawyer.
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Can someone please tell me whether an 1120S Corp would be better

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Can someone please tell me whether an 1120S Corp would be better than an LLC for a very small road service company with one truck? Tax-wise?
From an income tax perspective, it really makes no difference whether you are an S-corporation or an LLC.

Both types of entities are taxed the same. The earnings are passed through to the owners individual tax returns.

The primary difference is in the types of individuals or corporations who can own the company. If you or one or two others are the owners, then that is fine. It is just there are restrictions if you want to have other corporations be the shareholders, or if you have non-US citizens as owners/shareholders.
Customer: replied 5 years ago.
Thank you, XXXXX XXXXX the LLC have to pay taxes as well as the owner or is the profit or loss passed through to the owner?
No, the beauty of the LLC is that it does not pay taxes itself. All of the income is passes through to the individual owners who report it on their individual returns.

There is only one level of taxation at the owners personal income tax return level. The LLC itself does not pay tax.

Works the same way as S corp for tax purposes.

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Customer: replied 5 years ago.
Hi, do you have any idea then what is the purpose of having two that are the same? Surely, there must be some difference in them. Thanks, LuAnn
Yes, there are some.differences in what kind of people can be the owners. For example, s corporatiot shareholders can only be US citizens or permanent residents. They overseas corporations, for example. Howevera foreign corporation could own an LLC. Also, the number is XXXXX corp shareholders is limited to 35: but no limit in LLC

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