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Plain answers, no tax advice
LLC vs S corp: a company type and a tax choice
An LLC is something you form with your state. S corp is a tax status you ask the IRS for. Here is how they fit together, so you can have a better conversation with your accountant.
The short answer
An LLC is a kind of company you form with your state. An S corporation is a way of being taxed by the IRS. They aren't opposites, so you don't always pick one or the other: an LLC can stay taxed the default way, or it can ask the IRS to treat it as an S corporation. A corporation can make the same request.
Side by side
| LLC | S corp status | |
|---|---|---|
| What it is | A type of business you form with your state | A tax status the IRS grants to an eligible business |
| How you get it | File Articles of Organization with the state | File IRS Form 2553, signed by all shareholders |
| Default federal tax | One member: reported on the owner's return. Two or more members: taxed as a partnership | Income generally passes through to the shareholders |
| Owners | No federal limit on number or type | Up to 100 shareholders, generally individuals, certain trusts and estates, no nonresident aliens |
| Ownership classes | Flexible | One class of stock |
| Paying yourself | Owners usually take draws | An owner who works in the business must be paid reasonable compensation before other distributions |
How an LLC is taxed by default
The IRS treats an LLC with one member as part of its owner's tax return, unless it elects otherwise. An LLC with two or more members is taxed as a partnership by default. Either way, the profit is reported by the owners, not taxed at the company level.
What S corp status changes
An S corporation's income is generally taxed to its shareholders rather than to the company. The difference people usually care about is how owners are paid: an owner who works in the business takes a salary, which the IRS says must be reasonable compensation for the work, and can take further profit as distributions.
Whether that saves money depends on your profit, your salary, payroll costs and your state's taxes. That's a question for your accountant, and it's worth asking before you file Form 2553.
Who can elect
- The business must be a domestic corporation, or an LLC that elects to be taxed as one.
- No more than 100 shareholders.
- Shareholders are generally individuals, certain trusts and estates. Partnerships, corporations and nonresident aliens can't be shareholders.
- Only one class of stock.
When to file Form 2553
The IRS accepts Form 2553 no more than 2 months and 15 days after the start of the tax year the election should take effect, or at any time during the year before. An LLC that makes a valid S corp election on Form 2553 is treated as a corporation from the election's effective date and does not also need to file Form 8832.
What we do
We form the company. An LLC is $99 plus your state's filing fee at cost (from $35 to $520), with the EIN and an operating agreement included. A corporation is $99 plus the state's corporation fee. When you form a corporation, tick the S corp box in the order form at no extra charge and we send you the Form 2553 instructions after the state approves it.
We don't give tax advice and we don't decide your tax setup for you. We file the paperwork accurately and quickly.
Sources checked October 2026: IRS: S corporations · IRS: Instructions for Form 2553 · IRS: Limited liability company · IRS: S corporation compensation
FAQ
Questions, answered
Is an S corp better than an LLC?
They aren't the same kind of thing. An LLC is a legal structure; S corp is a tax status. Many small businesses are LLCs taxed as S corporations. Whether that makes sense for you depends on your numbers, so ask an accountant.
Can an LLC become an S corp?
An LLC can elect to be taxed as an S corporation by filing IRS Form 2553, if it meets the IRS rules. It stays an LLC under state law.
Do I form an S corp with the state?
No. The state forms an LLC or a corporation. S corp status comes from the IRS after you file Form 2553.
What is the deadline for Form 2553?
No more than 2 months and 15 days after the start of the tax year the election should take effect, or any time in the year before. The IRS has relief rules for late elections; ask your accountant.
Can HourLLC file my Form 2553?
When you form a corporation with us, tick the S corp box and we send you the Form 2553 instructions after approval. All shareholders sign the form and it goes to the IRS.