LLC vs. S-Corp — Choosing the Right Business Structure

Key Differences Between LLC and S-Corp

One of the most common questions from Korean American entrepreneurs is: "Which is better — an LLC or an S-Corp?"

LLC (Limited Liability Company)

• Simple and inexpensive to form
• High operational flexibility
• All profits subject to self-employment tax (SE Tax, 15.3%)
• Ideal for small businesses in early stages

S-Corporation

• Must set a reasonable salary for owner-employees
• SE tax only applies to salary — significant tax savings
• Most beneficial when annual net income exceeds $40,000
• Limited to 100 shareholders, U.S. citizens/residents only

Which Structure is Right for You?

If your net income is below $40,000, an LLC may suffice. Above that, converting to an S-Corp is worth considering. TPT Tax will recommend the optimal structure for your business.