S Corporation or S Subchapter, also known as an S Division, is one type of legal business structure common among small businesses. A limited liability company (LLC) is different.
S corporation requirements give corporations with 100 or fewer shareholders the benefit of registering for taxation as a partnership.
Both the S corporation and the LLC are pass-through entities, which means they don’t pay corporate taxes, and both offer limited liability protection for their owners/executives. However, LLCs are more flexible.
The shareholders of an S corporation must be individuals, certain trusts and estates, or certain tax-exempt organizations. An LLC is not subject to the same Internal Revenue Service (IRS) rules governing the number and type of members, which are usually individual owners or small groups of professionals.