Starting a Small Business/corporation choice


I am opening a pizza shop and catering business with my brother. What Could be better. A s corporation or a LLC. Thanks for your help.

There is no "best" choice for your circumstances.  There are both advantages and disadvantages to an LLC (taxed as a partnership) over an entity taxed as an S corporation (which can include an LLC which elects to be taxed as a S corp).  For the rest of this answer, when I refer to an LLC I mean only an LLC which has not elected to be treated as a corporation (S corp or otherwise).

The biggest advantage of an S corp is that the profits of the business over and above your reasonable wages (salaries and bonuses) will be taxed as distributions that are not subject to self-employment taxes.  With an LLC, all of your income from the business will be treated as income from self-employment.  That means as an owner of an LLC you will pay social security taxes on all earnings from the business up to the base amount (currently $118,500 in 2015) and the 2.9% Medicare tax on ALL earnings.

For that reason alone, most businesses like yours would be better off as an S corp.  Assuming that you have other employees and are already burdened with the cost and administrative effort to withhold taxes from employees' wages, deposit the withheld funds with the IRS and file employment tax returns, there is little downside to electing S corp status.  You do have to pay yourself wages and it does mean that you need to be in a position to make certain financial decisions before the end of each tax year, but the additional effort is generally rewarded by reducing the overall amount of taxes you pay.

Starting a Small Business

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David K. Staub


I am a business and tax attorney and have spent more than 35 years assisting people in starting a wide variety of businesses. I can answer questions about the basic differences between the various entities available to new businesses, including limited liability companies, corporations, S corporations and partnerships. I can provide guidance in other areas facing start ups, such as hiring employees, signing contracts and obtaining necessary licenses. I can also direct people to sources for answers to specific legal questions which cannot be answered in a forum of this nature.


I have an extensive practice in the mergers and acquisitions area and have been involved in the tax and legal issues on hundreds of business transactions.

Staub Anderson LLC
Illinois business attorneys

Practice Areas
Business Organizations


-Joint ventures
Mergers & Acquisitions
-Buying/selling business
Securities Law
Tax Law
Technology Law
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Illinois State Bar Association; Chicago Bar Association (former Chairman of the Corporation & Business Law Committee and former Chairman of the Mergers and Acquisitions Subcommittee; former Executive Committee member, Federal Tax Committee and Chairman of subcommittee on general tax issues); Keystone Foundation (Trustee); Association for Corporate Growth; Midwest Entrepreneur Forum; Midwest Association of Alpha Delta Phi

Commerce Magazine; YLS Journal; ISBA Section of Taxation Newsletter

Harvard Law School, J.D., 1977; University of Illinois, B.S. in Accounting, with highest honors, 1974

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