LLC vs S-Corp in Louisiana


Steve Goldstein
Steve Goldstein
Business Formation Expert
Steve Goldstein runs LLCBuddy, helping entrepreneurs set up their LLCs easily. He offers clear guides, articles, and FAQs to simplify the process. His team keeps everything accurate and current, focusing on state rules, registered agents, and compliance. Steve’s passion for helping businesses grow makes LLCBuddy a go-to resource for starting and managing an LLC.

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LLC vs. S Corp in Louisiana

Making choices as an entrepreneur is a big challenge, especially when choosing what business structure to form in Louisiana. When it comes to a business structure, you can choose whether to have a C-corporation, S-corporation, Sole Proprietorship or an LLC in Louisiana. Before you start Louisiana LLC filing, you must compare which structure suits you. You might be considering two popular options: a Limited Liability Company (LLC) or an S Corporation (S-Corp). Both of these structures offer distinct advantages and protections, but selecting the right one depends on various factors, including your business goals, tax preferences, and management style.

If you are confused with Louisiana LLC vs. S-Corporation, and thinking which one is better and more suitable for the business that you will form, there are a few things that you should consider. Before we get through this article, you should understand what an LLC and S-Corporation mean in Louisiana.

LLC vs. S-Corp: Definition

While forming an LLC, you must follow some major steps. It is a business structure that protects your personal assets from getting affected by business liabilities. On the other hand, the S Corp is not a conventional business structure, but it is tax status that your can file with the IRS. S Corp does not provide personal asset protection like an LLC. Here are the detailed definitions of the two-

What is an LLC in Louisiana?

A limited liability company (LLC) is a formal business structure that provides personal asset protection. Under this structure, the LLC owner/member can save his/her personal assets in case the business is in debt or is being targeted with a lawsuit. In some special cases, if your company is legally sued, the other party can go after your personal assets. This is called piercing the corporate veil, where you become personally liable for the company’s debt.

Forming an LLC in Louisiana gives you a pass-through tax benefit where you don’t have to pay an income tax based on your business revenue; instead, the income tax will be calculated based on your personal income.

What is an S-Corp in Louisiana?

An S-Corporation (S-corp) is not a type of corporate entity, unlike a limited liability company (LLC) or other business structures. It’s a tax classification that might result in significant financial savings for corporations and LLCs but in different ways. S-Corporation is similar to LLC, except that the IRS treats it as a corporation for tax purposes.

S-corp is a prominent alternative to the LLC. Unlike a conventional C-corp, S-corp is more suitable for small and medium businesses, such as businesses with 100 shareholders.

LLC Vs. S-Corporation: Which is More Preferable in Louisiana?

In Louisiana, forming a business is crucial since you need to be adequate in your decision, especially when you think if Louisiana LLC or an S-Corporation in Louisiana is preferable. An S-Corporation is a tax classification that some small businesses are qualified for, whereas an LLC is a legitimate company form. By submitting a document to the Internal Revenue Sector (IRS), corporations and LLCs can choose S-Corporation taxation. An S-Corporation can be less formal than forming an LLC and doesn’t normally provide the same protection. Also, unlike LLC, S-Corporation in Louisiana doesn’t provide the same protections entrepreneurs seek from an LLC. It’s important to consider your options when launching a business from a legal and tax point of view.

It is better to consult a legal professional before you set up an LLC or S-corp. We shared basic differences and how you can form an LLC and S-corp. But it is always recommended to consult a professional before making any decision.

LLCBuddy Editorial Team

Tax Difference Between Louisiana LLC and S-Corp in Louisiana

There is a difference between LLC and S-Corporation when it comes to paying taxes. Based on Federal and State Tax differences between the two, you can determine if S-Corporation or LLC in Louisiana is suitable for your business.

Federal Taxes: There are a few federal tax factors to consider when selecting whether to operate an LLC or S-Corporation in Louisiana. Tax differs in terms of Pass-Through Taxes and Self-Employment Taxes.

Pass-Through Taxes: LLC and S-Corporation in Louisiana are the same in terms of pass-through taxation at the federal level. LLCs and S-Corporations do not pay federal income taxes as separate legal entities because of pass-through taxation. Only their owners are required to pay federal income taxes on their portions of the business income. The company does not pay twice the tax in this kind of taxation. Unlike LLCs and S-Corporations, C-Corporations in Louisiana are mandated to have double taxation. It means that they must pay federal taxes at the entity level.

Self-Employment Taxes: Most LLC owners choose S-corporation taxation in Louisiana to reduce their self-employment taxes. This is because if you own an S-corporation, you are not required to be self-employed. Instead, you can join the company as an employee and receive regular salary benefits. On the other hand, an LLC member must include their guaranteed payments and a portion of the LLC’s earnings in calculating their self-employment tax. Distribution of shares defines S-Corporation shareholders in terms of their corporate incomes.

Consider the scenario where you are the only owner of an LLC in Louisiana with a $150,000 annual profit. And let’s say that $100,000 is a fair wage in your location for someone doing the same job as you. Under the default LLC taxation, you must pay self-employment taxes on the entire $150,000 profit. But, if your company is taxed as a Louisiana S-Corp, you will only be responsible for paying payroll taxes on the standard wage of $100,000. Income tax will still apply to the remaining $50,000.

Louisiana State Taxes: At the state level, there aren’t any significant tax differences between regular LLCs and S Corporation LLCs. In terms of the annual LLC fee in Louisiana, it costs $30 that can be paid to the ME Secretary of State. Of course, before forming the whole LLC, you must pay the initial fee of $100.

On the other hand, you also need to pay taxes if you form an S-Corporation in Louisiana; besides, you must pay the S-Corp filing fee and an annual report fee after a year of establishing your S-Corp. You must also go to the ME Secretary of State to pay this.

How do Louisiana LLCs and S-Corporations Handle Liability Protection?

In Louisiana, you have no personal responsibility for the financial and legal liabilities of an LLC you will form. An S-Corporation does not provide liability protection because it is a tax designation rather than a distinct business entity. Whatever liability defense an S-Corporation provides is provided by the underlying business entity that chose the tax status. You will have the liability protection the LLC offers if it chooses S-Corporation status for tax purposes.

LLC Vs. S Corporation Ownership Requirements Comparison

Strict ownership requirements exist for LLCs and S-Corporations in Louisiana. LLC ownership regulations are strict because a new member can only be accepted with the approval of all existing members. On the other hand, S-Corporation ownership regulations are also strict because only specific people are permitted to become shareholders. Also, an S-Corporation can’t have more than 100 shareholders and needs one class of stock.

The following are the reasons why some cannot be shareholders in the S-Corporation in Louisiana.

  • Insurance business
  • Domestic and International sales corporations
  • Partnerships
  • Corporations
  • Unauthorized Immigrants
  • Certain financial institutions

Although you know most of the reasons regarding the ownership requirements of both LLC and S-Corporation, you should still seek legal advice in preparation for your business and it is best to visit LLCBuddy for your Louisiana LLC or Louisiana S-Corp.

Which is Easier to File in Louisiana: LLCs or S-Corporations?

Filing an LLC or S-Corporation in Louisiana takes time and preparation. Even though it is not as easy as it seems, something manageable still makes it not difficult. LLC and S-Corporation can be filed by Louisiana Resident Agent. However, in order to establish an LLC in Louisiana, you must submit a Articles of Organization to the Louisiana Secretary of State. Your Articles of Organization must contain information for your LLC, along with payment of the associated filing fee.

In addition, you need to submit more papers to make the Louisiana S-Corporation election. File a Form 8832 to inform the Internal Revenue Sector (IRS) that you prefer to tax your LLC as a corporation rather than a partnership. Then you will then submit Form 2553 to choose S-Corporation status.

Do not forget that you must submit annual tax returns and reports after creating your LLC in order to maintain legal compliance.

Important Information

Who Pays More Taxes, an LLC or S-Corporation?

Taxes differ for LLC and S-Corporation in Louisiana because it depends on the tax purposes and how much profit will be generated. Usually, LLCs are frequently taxed at personal rates and LLC owners can elect to be treated as a separate company with its own federal tax identification number.

On the other hand, owners of S-Corporations must receive a salary that includes Social Security and Medicare taxes. The owner, however, can get dividend income or some of the leftover profits, but not as an employee; thus, they won’t be subject to Social Security and Medicare taxes on that money.

Should I Convert an LLC to S-Corporation?

Since your business assets are separated from your personal assets if you’re a sole proprietor, it may be advisable to form an LLC. You are not restricted to modifying the structure of your LLC to an S-Corporation. Although an S-corporation must have a board of directors, a maximum of 100 shareholders, and adhere to more regulations, it would be ideal for more companies with more shareholders.

How to Structure an LLC to S-Corporation?

To structure an LLC to S-Corporation in Louisiana, you must submit Form 2553, Election by a Small Business Corporation, to the IRS in order to choose S-corp taxation. Filing a form 2553 should be done 75 days after the formation of your S-Corp, or not more than 75 days after the beginning of the tax year in which the election is to take effect.

If your LLS-Corp has passed the deadline of 75 days, you must also file Form 8832, Entity Classification Election, in order to opt to be taxed as a corporation. Then you would send Form 2553 and Form 8832 jointly by certified mail from the USPS. In Louisiana, you can file your form 2553 in the Department of the Treasury Internal Revenue Service Center – Ogden, UT 84201 Fax: 855-214-7520 .

FAQs

What are the differences between an LLC and S-Corp in Louisiana?
An LLC in Louisiana is a limited liability company, which provides limited liability protection for members and pass-through taxation. An S-Corp is a corporation which allows the income to pass through to the shareholders, offering protection from personal liability. Both LLCs and S-Corps have to be registered with the Louisiana Secretary of State.
Is it more expensive to set up an LLC or S-Corp in Louisiana?
The cost of setting up an LLC or S-Corp in Louisiana depends on the business structure you choose and the services you need. Generally, LLCs are less expensive to set up than S-Corps.
Are there any special tax considerations when forming an LLC or S-Corp in Louisiana?
Yes, if you form an LLC or S-Corp in Louisiana, you should be aware of the Louisiana state taxes that apply. Generally, LLCs are not taxed, but S-Corps are taxed at the corporate level and may be subject to Louisiana state income tax.
What requirements must be met to form an LLC or S-Corp in Louisiana?
When forming an LLC or S-Corp in Louisiana, you must choose a name for the company, file organizational documents with the Louisiana Secretary of State, obtain any necessary licenses and permits, and register with the Louisiana Department of Revenue.
What are the benefits of forming an LLC or S-Corp in Louisiana?
Forming an LLC or S-Corp in Louisiana can provide limited liability protection for members and shareholders, pass-through taxation, and potentially lower taxes.
Are there any restrictions on ownership of an LLC or S-Corp in Louisiana?
Yes, there are restrictions on ownership of an LLC or S-Corp in Louisiana. Generally, LLCs can only have one class of members, while S-Corps can have up to 100 shareholders.
What are the steps for registering an LLC or S-Corp in Louisiana?
The steps for registering an LLC or S-Corp in Louisiana include choosing a name for the company, filing organizational documents with the Louisiana Secretary of State, obtaining any necessary licenses and permits, and registering with the Louisiana Department of Revenue.
What are the filing requirements for LLCs and S-Corps in Louisiana?
LLCs and S-Corps in Louisiana must file an annual report and pay any taxes that may be due. Additionally, LLCs must file a biennial report and may be required to pay a registration fee.
How long does it take to form an LLC or S-Corp in Louisiana?
It typically takes between 2-4 weeks to form an LLC or S-Corp in Louisiana, depending on the complexity of the business structure.
What is the difference between LLC and S-Corp in Louisiana?
Limited Liability Companies (LLCs) and S-Corporations (S-Corps) are two distinct types of business entities designed to protect owners and managers from liability. LLCs offer flexible ownership structures and the ability to pass profits and losses directly to the owners’ personal income, while S-Corps are subject to more stringent management and taxation regulations.
Does Louisiana have a franchise tax?
Yes, Louisiana has a franchise tax that applies to all LLCs, S-Corps, and other business entities formed in the state. The franchise tax is a flat rate that is based on the total number of shares issued for the entity.
Is an LLC better than an S-Corp in Louisiana?
It depends on your particular situation. LLCs offer greater flexibility in terms of ownership and taxation, while S-Corps offer the benefit of limited liability protection.
How do I form an LLC or S-Corp in Louisiana?
You can form an LLC or S-Corp in Louisiana by filing the appropriate formation documents with the Louisiana Secretary of State.
What is the annual filing fee for LLCs and S-Corps in Louisiana?
The annual filing fee for LLCs and S-Corps in Louisiana is $50.
Is there a minimum capital requirement to form an LLC or S-Corp in Louisiana?
No, there is no minimum capital requirement to form an LLC or S-Corp in Louisiana.
What are the tax advantages of an LLC or S-Corp in Louisiana?
LLCs offer the benefit of flow-through taxation, while S-Corps offer the advantage of limited liability protection. Both business entities are also eligible for certain tax credits and deductions in Louisiana.
Is it possible to convert an LLC to an S-Corp in Louisiana?
Yes, it is possible to convert an LLC to an S-Corp in Louisiana.
Are S-Corps in Louisiana required to hold annual meetings?
Yes, S-Corps in Louisiana are required to hold annual meetings of shareholders and directors.
Are LLCs in Louisiana required to prepare an annual report?
No, LLCs in Louisiana are not required to prepare an annual report.
Is it possible to form a single-member LLC in Louisiana?
Yes, it is possible to form a single-member LLC in Louisiana.
Are LLCs in Louisiana required to have a board of directors?
No, LLCs in Louisiana are not required to have a board of directors.
Is it possible to convert an S-Corp to an LLC in Louisiana?
Yes, it is possible to convert an S-Corp to an LLC in Louisiana.
How does Louisiana tax LLCs and S-Corps?
LLCs in Louisiana are taxed as pass-through entities, meaning that profits and losses are passed directly to the owners’ personal income. S-Corps in Louisiana are subject to the corporate income tax rate.
Are LLCs and S-Corps in Louisiana required to pay estimated taxes?
Yes, LLCs and S-Corps in Louisiana are required to pay estimated taxes on a quarterly basis.
How do I register a trade name for my LLC or S-Corp in Louisiana?
You can register a trade name for your LLC or S-Corp in Louisiana by filing an Application for Registration of Trade Name with the Secretary of State.
Are LLCs and S-Corps in Louisiana required to have bylaws?
Yes, LLCs and S-Corps in Louisiana are required to have bylaws that outline the governance and management of the business.
Is it possible to form a multi-member LLC in Louisiana?
Yes, it is possible to form a multi-member LLC in Louisiana.
What are the minimum liability requirements for LLCs and S-Corps in Louisiana?
LLCs and S-Corps in Louisiana are required to maintain a minimum level of liability insurance in order to protect their owners and managers from liability.
Are LLCs and S-Corps in Louisiana required to keep minutes of meetings?
Yes, LLCs and S-Corps in Louisiana are required to keep minutes of meetings of shareholders and directors.
Is it possible to transfer an LLC or S-Corp in Louisiana?
Yes, it is possible to transfer an LLC or S-Corp in Louisiana.
What are the annual filing requirements for LLCs and S-Corps in Louisiana?
LLCs and S-Corps in Louisiana are required to file an annual report with the Secretary of State.
Are LLCs in Louisiana required to have a registered agent?
Yes, LLCs in Louisiana are required to have a registered agent in order to receive service of process on behalf of the company.
Is it possible to dissolve an LLC or S-Corp in Louisiana?
Yes, it is possible to dissolve an LLC or S-Corp in Louisiana.

Also Read

Why Louisiana LLC Vs S Corp is So Important

One of the primary reasons why the choice between a Louisiana LLC and an S Corp is so crucial is the tax implications of each structure. S Corps are considered “pass-through” entities, meaning that the business itself does not pay income tax. Instead, the profits and losses are passed through to the individual shareholders, who report them on their personal tax returns. This can be beneficial for small businesses, as it can help avoid double taxation that can occur with C Corporations.

On the other hand, Louisiana LLCs offer more flexibility when it comes to tax treatment. By default, LLCs are taxed as pass-through entities similar to S Corps. However, LLCs also have the option to be taxed as a C Corporation if it is more advantageous for the business. This flexibility can be especially beneficial for businesses that may want to reinvest profits back into the company or take advantage of tax benefits that come with being taxed as a C Corporation.

Another important factor to consider when choosing between a Louisiana LLC and an S Corp is the ownership and management structure of each entity. S Corps have strict ownership and management requirements, including limitations on the number and type of shareholders, as well as restrictions on who can serve as a shareholder. LLCs, on the other hand, offer a more flexible ownership and management structure, allowing for more freedom in how the business is operated.

In addition to tax and management considerations, the choice between a Louisiana LLC and an S Corp can also have legal implications. While both entities offer limited liability protection, LLCs may provide stronger protection in some cases. For example, LLCs typically have better protection against personal liability for the debts and obligations of the business, while S Corps may have more exposure to legal risks.

Ultimately, the decision between a Louisiana LLC and an S Corp will depend on the specific needs and goals of your business. It is important to carefully consider all of the factors involved, including tax implications, ownership and management structure, and legal protections, before making a decision.

In conclusion, the choice between a Louisiana LLC and an S Corp is a crucial decision that can have a significant impact on your business. By understanding the key differences between the two entities and considering all relevant factors, you can make an informed decision that will support the long-term success of your business.

Conclusion

Even though you can choose a different corporate structure, consider whether it will primarily assist your organization. Striking the perfect balance between corporate benefits and legal protection that suits your particular needs is important. In forming an LLC or S-Corp in Louisiana, you must be aware that every detail is well-formed so that starting your business will be successful. And, if you would like us to help you form a Louisiana LLC and S-Corp in Louisiana, read our other business guides.

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