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From tax perspective - because the LLC is a disregarded entity - that makes no difference if you personally or your single member LLC is a shareholder of that S-corporation.
However - in case the LLC will be a shareholder - if later you will choose
- to add a member to that LLC, or
- to elect the LLC to be treated as a corporation
Then - S-corporation will be automatically converted to C-corporation.
If that is not what you want - you might avoid such changes.
Because both a single member LLC and S-corporation do not pay income tax or self-employment tax - there is no difference.
All income will be passed to you personally regardless if you personally or the SMLLC will legally be a shareholder.
The LLC will be simply disregarded (ignored) - and income reported by S-corporation will be directly reported on your individual tax return.
That is not correct assumption...
Because that is a single member LLC - it is disregarded entity.
Disregarded - means ignored for income tax purposes.
That means all income and all expenses received and paid by the LLC are considered as received and paid by you personally.
So - if the LLC rurs business operations and pays royalties which qualifies as business expenses - then - you will report business income and deductible business expenses on schedule C attached to your individual tax return.
That woudl be the SAME if business activities are run by your personally and there is no any LLC.
Let me know if that helps.