CHOICE OF ENTITY FOR REAL ESTATE OWNERS
LIMITED LIABILITY COMPANY VS. S CORPORATION
VS. C CORPORATION
A Comparison Of These Business Entities
Dean A. Rocheleau, J.D., CPA
Plante & Moran, PLLC
This outline compares the similarities and differences between the three
major business entities currently selected by our clients to obtain limited
liability protection. Two of the entities provide pass-through taxation
treatment but with some significant differences. These are the Limited
Liability Company ("LLC") and the S Corporation (“S Corp”). The third
alternative, the C Corporation (“C Corp”), is subject to tax on its earnings
at the entity level.
This outline compares the attributes of multiple-owner Michigan LLCs, S
Corps and C Corps. The outline primarily addresses issues to be
considered when forming a new business entity for a particular client
need, not necessarily when deciding whether to convert an existing
business entity to an LLC, S Corp or C Corp.
A checkmark (“”) is used to indicate where the LLCs, the S Corps or the
C Corps provide an advantage with respect to a certain attribute.
Note that all “section” references are to the Internal Revenue Code of
1986, as amended through September 30, 2005.
II. GENERAL ISSUES
Limited liability protection for owners
LLCs – One of the principal purposes for forming LLCs is to
protect the members’ personal assets from the creditors of the
LLC; absent any personal guarantees made by the members, the
creditors of LLCs may only satisfy their claims from the assets of
S Corps – One of the principal purposes for forming S Corps is to
protect the shareholders’ personal assets from the creditors of the S
Corp; absent any personal guarantees made by the shareholders,
the creditors of S Corp may only satisfy their claims from the
assets of the S Corp. However, S Corps have more case law