Only the portion of W2 wage or salary earnings paid by the S-Corp to the owner as employment compensation are subject to self-employment tax.
An L.L.C. is flexible in how profits losses can be distributed among members
Income, losses, and distributions are assigned according to the proportion of share ownership
No restrictions on membership and business can have an infinite number of members.
Maximum of 100 shareholders who must be natural persons, or a limited set of other entities.
S-Corps can be beneficial for a variety of types of business industries where a large benefit comes from avoiding a large amount of self-employment tax.
L.L.Cs are easy for newly starting business to form, and are very flexible to change into other entities as the business grows.
Converting from a corporate entity is generally a liquidation event and can therefore have large tax consequences.
Heirs enjoy a step up in basis to fair market value of membership interest, and property assets of the L.L.C. upon the death of the member
Heirs enjoy a step up in basis to fair market value upon the death of the shareholder.