LLC or S Corp are distinct tax structures. LLCs are simple and flexible, whereas S Corps are more structured with stricter rules and compliance requirements. In an LLC, pass-through taxation is applied, meaning that the profits are directly transferred to the owners or shareholders, and later the owners pay personal income tax. In an S Corp, too, the pass-through taxation method is followed, but it differs in how owners are taxed on their income. In an S Corp, owners who actively work for the business must pay themselves a reasonable salary, which is subject to payroll taxes.
