This informative article discusses the some of the important tax differences between an LLC and an S Corporation. In California, LLCs pay franchise tax fees based on gross income that have no relation to profits and corporations are not subject to this tax. Corporations can be used to reduce self employment taxes, so many of my clients find that the S Corporation is still the preferred form of business for most small business owners in California.
Choosing the proper business entity for you is often a question that should be addressed by your attorney and CPA. Tax planning and personal asset protection are both very important issues that should be addressed by qualified practioners.
About the Author: Carl H. Starrett II, has been a licensed attorney since 1993 and is a member in good standing with the California State Bar and the San Diego County Bar Association. Mr. Starrett practices in the areas of bankruptcy, business litigation, construction, corporate planning and debt collection.