| Tax Rate | One tax rate of 21% applies to taxable income. Personal Service Corporations are taxed at 35% of all income. | There is no tax to the LLC on LLC income. All profits or losses pass through and are taxed to the members. | There is no tax except in two limited circumstances: (1) Recognized built-in gains and (2) Excess passive income. |
| Pass Through of Losses | Losses not passed through. | Losses passed through to members, subject to certain restrictions. | Losses passed through to shareholders, subject to certain restrictions. |
| Fiscal Year | May use any fiscal year. Personal Service Corps must use a calendar year, subject to certain exceptions. | Must use tax year of members having a majority interest in the LLC, or the tax year of all principal members if there is no majority member. | Must use calendar year, subject to certain exceptions. |
| Liabilities and Basis | Not increased. | Increased. | Not increased. |
| Liability of Owner | There is limited liability for shareholders, officers, and directors. | There is limited liability for owner(s) and manager(s). | There is limited liability for shareholders, officers, and directors. |
| Fringe Benefits | Shareholders – Employees are eligible for most. | Members are ineligible for certain ones. | 2% shareholders are ineligible for certain ones. |
| Tax Upon Sale | Potential double taxation. Corporation is taxed on sale of assets, shareholders taxed on dividends or capital gains tax. | Single tax at member level upon sale of appreciated assets. Generally, no tax on distribution of appreciated assets. | Single tax at member level. Potential built-in gains taxed if corp. had appreciated property at time of S corp. election. |
