Difference between S Corp and LLC for your Optometry Practice
You have worked for years in corporate optometry and now believe that you know everything there is to know about the field. You have all your funds and skills together, you have consulted all the business mentors, watched hundreds of documentaries on successful entrepreneurs, and are completely ready to carve out your own path.
But there is one itching question that you have not been able to solve yet. Should you open your optometry practice as an LLC or S corporation?
The business structure that you choose for your business will have a long-term impact on a lot of crucial aspects of your business. This includes the rules and regulations surrounding liabilities and the rate at which your business is levied with taxes.
First, let us have a look what each of them means:
LLC stands for Limited Liability Company, which is a business structure where the associates of a company will not be held liable to pay off the company’s liabilities. This means the personal assets of the owner(s) of the company will not be sold off to pay the company’s debts when it files for bankruptcy.
S Corporation is the kind of corporate structure in which the business is able to evade the double taxation by not having to pay corporate income tax on the profits that it makes. It usually pays income in the form of dividends which leads it to avoid corporation and personal tax. This structure also helps the owners protect their assets from any type of corporate-based liability.
The LLC is better for those owners whose main priority is flexibility in business management. The owner of such a company wants to keep paperwork at pay, does not feel the need to gain extra investments and thus does not feel the need to put up the company in the stock markets. This sort of structure is well suited for a smaller scale business. S Corporation, on the other hand, is better suited for companies with a much more complicated organizational structure such as multinationals.
The LLCs are very flexible when it comes to who should be in the top management and who reports to whom. They can be changed according to the CEO or the shareholders themselves. However, with S Corporation everything is laid out in black and white and the people who are part of that corporation are not allowed to switch up the rules to their liking.
As mentioned before, one of the biggest advantages of having an LLC is less paperwork which makes it is significantly easier for the owners to set it up. However, the S Corporation requires the owner to fill out a great deal of paperwork, which may seem tedious at first but it will work well to provide as concrete proof during unfortunate times. This is especially important since with S Corporation we are talking about large sums of money that would be related to liabilities and taxation.