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What are Differences Between S Corps and LLCs in Record Keeping?


Question: What are Differences Between S Corps and LLCs in Record Keeping?
From attorney Robert Warwick:

Keeping Record Books
The cost and difficulty of keeping records for an LLC or S Corporation will depend on the requirements of the particular state. In general, however, LLCs have more organizational flexibility, which would tend to reduce the difficulty and cost of maintenance. For example Virginia and most if not all other states require a corporation to have a board of directors (Virginia allows a single director; some other states may still require the traditional three or more) and to hold annual meetings (in some states, including Virginia, the meeting may be held by written shareholder consent). These requirements do not apply to Virginia LLCs; applicable law needs to be consulted in other jurisdictions.

Annual Reporting Requirements
States may impose annual reporting requirements and registration fees on corporations or LLCs. In Virginia, a corporation must file an annual report containing, among other things, the names and addresses of its directors and principal officers and pay an annual registration fee that ranges from $100 to $1,700, depending on the number of authorized shares. By contrast, in Virginia LLCs are not required to file annual reports and the annual registration fee is a flat $50.

Record Keeping and Taxes
S corporations (including S corporations with a single shareholder) and multi-member LLCs are required to file federal information income tax returns. A single-member LLC is not considered an entity separate from its owner and is not required to file an entity-level income tax return. Most states, including Virginia, that impose income taxes treat S corporations and LLCs in the same manner as the federal government, however a few states may tax them at the entity level. Also, Virginia and a few other states require S corporations or LLCs with non-resident owners to pay or withhold income taxes on behalf of the nonresident owners.

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.

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