When going into business, the first consideration needs to be what structure should be the foundation of my business? Several factors should be taken into account when making that decision.  In most cases, small business owners are often evaluating between Limited Liability Companies (LLCs) or S-Corporations.

LLCs and S-Corporations have many similarities - they also have a number of distinct differences:

1. Ownership:  S-Corporations are limited to 100 shareholders and may not be owned by other S-Corporations, C-Corporations, LLCs, Limited Partnerships or by non-U.S. residents. LLCs have no such restrictions.
2. Management:  LLCs are managed by its owners, called Members, or by Managers appointed by the Members. S-Corporations have Directors (elected by the Stockholders) and Officers (elected by the Board of Directors).
3. Compliancy:  Certain corporate formalities, such as state and local filings and annual reports, must be done by both S-Corporations and LLCs. States are generally more lenient as to compliancy requirements with LLCs than with S-Corporations. However, as a practical measure, it is as necessary to keep good corporate records with an LLC as with an S-Corporation in order to keep from having the business treated as the owner's "alter ego" and thus piercing the "corporate veil."
4. Transferability of Interest:  S-Corporation stock is freely transferable. The membership interest of an LLC is not freely transferable and requires the approval of other members.
5. Length of Existence:  An S-Corporation's existence is perpetual. An LLC will have a finite lifespan as defined in the Articles of Organization. Additionally, certain events such as the death or withdrawal of a Member can cause the LLC to dissolve.
6. Tax Benefits:  The S-Corporation has additional tax advantages that are not typically available to the LLC.

A final word regarding single member LLCs. Although they are permited by most states, single member LLCs are not recognized by the IRS and the owner of a single member LLC must report business finances on his or her IRS Form 1040 Schedule C. This is the same form used by a sole proprietor and is one of the most highly targeted areas of IRS audits.