Although an S corporation shares many of the same tax characteristics as an LLC, an LLC has more flexibility and fewer restrictions than an S corporation. An S corporation cannot have more than 100 stockholders, cannot issue more than one class of shares, and is subject to more formalities than an LLC. However, owners of an LLC are required to pay Social Security and Medicare taxes on profits. Corporate stockholders are not required to pay these taxes on profits over and above the stockholders’ salaries.
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