S corporations are creatures of federal tax law and the Internal Revenue Code imposes restrictions on S corporations and their shareholders. An S corporation shareholder must be an individual who is not a nonresident alien (estates, and some trusts or exempt organizations may also be permitted S corporation shareholders). An S corporation may have no more than 100 shareholders (members of a family may count as a single shareholder for this purpose).
Financial institutions, insurance companies and certain other activities may not be operated as an S corporation and an S corporation may have only one class of stock.
LLC Ownership
LLCs on the other hand are creatures of state law. In Virginia, essentially any person or entity, including a corporation or another LLC and including a foreign person or entity, may be a member of an LLC. Virginia places no limit on the number of members an LLC may have. A Virginia LLC may engage in any lawful business not specifically prohibited and may have more than one class of membership.
For More Information
To find out more about restrictions on ownership of LLCs, go to your state's Secretary of State website, business division.
Robert Warwick has practiced tax and corporate law for more than 35 years, both in private practice and as in-house counsel for two major corporations. He is presently counsel to ThompsonMcMullan, a Richmond, Virginia law firm. He holds JD and MBA degrees from Cornell University and a Bachelor of Electrical Engineering from Rensselaer Polytechnic Institute. Mr. Warwick is actively practices law in Virginia and does not claim any knowledge as to the particular laws of any other jurisdiction.
Disclaimer: The foregoing does not constitute legal advice and does not create an attorney-client relationship.
Back to S Corps vs. LLCs
