An LLC Can Do That? – All Features Explained + FAQs

A limited liability company (LLC) is a business structure that can own property, enter contracts, and conduct almost any lawful business—while shielding its owners from personal liability. In short, an LLC in the U.S. can do everything a business needs to operate, across industries from real estate and consulting to e-commerce, combining the benefits of a corporation’s legal protection with the flexibility of a partnership. This expert guide breaks down exactly what an LLC can and cannot do, its full capabilities, and how it empowers businesses of all types.

LLC 101: Understanding the Limited Liability Company

An LLC (Limited Liability Company) is a legally recognized business entity created under state law. It’s a hybrid structure that blends features of corporations and sole proprietorships/partnerships. Like a corporation, an LLC exists separately from its owners (called members) and offers limited liability protection. Like a sole proprietorship or partnership, it’s relatively simple to run and offers flexible taxation by default.

Every U.S. state allows LLCs and sets its own rules for them. To form an LLC, you file Articles of Organization with a state and pay a fee. Once formed, the LLC becomes a separate “person” in the eyes of the law. This means the company itself can do things in its own name, not just through the owners. We’ll explore those capabilities next.

Full Business Capabilities: What an LLC Can Do for Your Business

An LLC can engage in any lawful business or activity in the United States, with only a few exceptions (like banking or insurance, which typically must use other structures). In practice, that means an LLC has the power to perform all the key functions a business requires. Here are the core business capabilities of an LLC:

• Own Property and Assets: An LLC can own real estate, vehicles, equipment, intellectual property, and other assets in its name. The company’s name appears on titles and deeds instead of individual owners’ names.
• Enter Contracts and Agreements: LLCs can sign contracts, leases, and agreements as an independent entity. Whether it’s a client contract, a rental lease for office space, or a supplier agreement, the LLC can be the party to the contract.
• Open Bank Accounts and Credit Lines: A business bank account can be opened under the LLC’s name and tax ID. LLCs can establish credit, take out loans, and even get business credit cards or lines of credit.
• Hire Employees and Contractors: An LLC can hire staff, pay salaries or wages, and contract with freelancers or vendors. It will have its own Employer Identification Number (EIN) for payroll and tax purposes.
• Sue and Be Sued: As a separate legal entity, an LLC can initiate lawsuits to protect its interests (for example, suing a vendor for breach of contract). Likewise, if the business faces a lawsuit, the suit is against the LLC itself, not directly against the owners in most cases.
• Borrow Money and Incur Debt: LLCs can take on debt, such as business loans, mortgages on property, or trade credit. The company is responsible for its debts, and members aren’t personally liable (unless they personally guaranteed a loan).
• Conduct Business in Multiple States: An LLC can register as a foreign LLC in other states to legally do business there. This means your LLC formed in one state can operate nationwide by filing the proper paperwork in each additional state as needed.
• Pay Taxes and Manage Finances: An LLC files taxes either through its owners’ returns or as a separate entity, depending on the chosen tax status (more on that later). It keeps its own financial records and bank accounts, which simplifies accounting and tax preparation.
• Raise Capital (Privately): While an LLC can’t issue public stock like a corporation, it can raise money by bringing in new members or investors, or through loans. Members can contribute capital to the LLC in exchange for a percentage ownership (membership interest).
• Continue Beyond Owners: An LLC can have perpetual existence. The business doesn’t automatically end if an owner leaves or passes away, as long as the operating agreement or state law provides for continuation. This allows an LLC to carry on and owners to transfer their membership stakes.

In essence, an LLC gives your business an identity of its own. It can do nearly everything a corporation can do in day-to-day operations. Now, let’s look at how LLCs are utilized across different industries and business types.

LLCs in Every Industry: Versatility from Real Estate to E-Commerce

One reason LLCs are so popular is that they are extremely versatile. Entrepreneurs and companies use LLCs in virtually every industry. Here we explore major industries and scenarios where LLCs operate, and how they leverage the LLC structure for success.

Real Estate: Protecting Properties with an LLC

Real estate investors and landlords often use LLCs to hold properties. For example, someone owning rental houses might form “Smith Properties LLC” to own the homes. The LLC owns the real estate, collects rent, and manages property business. If a tenant or visitor sues over an injury on the property, the lawsuit targets the LLC’s assets (the property and its insurance), not the owner’s personal assets.

LLCs in real estate also make it easier to transfer properties. You can sell or assign the LLC that holds a property, rather than changing the property deed each time. Many investors create a separate LLC for each property to isolate liability for each one. Asset protection is the key benefit here: the owner’s personal wealth is safer, and one property’s liabilities won’t spill over to others if each is in its own LLC.

Consulting & Freelancing: Professional Services through an LLC

Independent consultants, freelancers, and other professionals commonly form single-member LLCs. If you’re a consultant, designer, software developer, or advisor, an LLC can elevate your one-person business. It allows you to operate under a company name (e.g., “Jane Doe Consulting LLC” instead of just Jane Doe), which can add credibility when dealing with clients.

The LLC protects your personal assets from business liabilities. For instance, if a client contract goes wrong or someone claims damages from your advice, your LLC is on the hook rather than you personally (excluding cases of personal negligence or malpractice, where you’d still be individually responsible). Additionally, running your consulting through an LLC can simplify separating business finances (income, expenses, taxes) from personal finances. This structure is also useful as you grow—if you later take on a partner or hire employees, your LLC can easily accommodate that.

E-Commerce: Powering Online Businesses with LLCs

The boom in e-commerce and online business has also seen many entrepreneurs choosing LLCs. Whether you run a Shopify store selling products or a content-based website with ad revenue, an LLC can be your business vehicle. It provides a legal framework for your online venture, allowing you to open business bank accounts, set up payment processors in the company name, and handle any liabilities arising from products or services you sell online.

For example, imagine an Amazon seller creating “Tech Gadgets LLC” for their online electronics shop. If a product they sell causes an issue and a customer takes legal action, the LLC helps shield the seller’s personal assets. E-commerce LLCs also make partnership easier—two friends starting an online store can form an LLC to clearly share ownership and profits. In short, LLCs provide structure and safety for digital entrepreneurs, who often operate from home but want the formal protections of a company.

Main Street Businesses: LLCs for Everyday Operations

Beyond niche cases, LLCs are a go-to structure for general business operations on Main Street. Restaurants, retail shops, craft breweries, marketing agencies, construction companies, and countless other local businesses use the LLC format. The owners benefit from not being personally liable for business debts: if the business runs into financial trouble, creditors can go after the LLC’s assets but not the owners’ houses or savings (again, assuming no personal guarantees or fraud).

LLCs also offer flexibility in management for these businesses. Owners (members) can run the day-to-day themselves (member-managed LLC), or they can appoint a manager (manager-managed LLC) which might be practical if some investors are passive. This adaptability makes the LLC suitable whether you’re a hands-on owner or more of an investor. From mom-and-pop shops to midsize firms, LLCs serve as the backbone for operations, combining protection with operational ease.

Legal Limitations: What an LLC Can’t Do (and Why)

While LLCs have broad powers, they do face some legal limitations and restrictions. It’s important to know the boundaries of what an LLC can do under U.S. law:

• Cannot Practice Certain Licensed Professions (without PLLC): Many states bar licensed professionals (doctors, lawyers, accountants, etc.) from operating under a plain LLC. Instead, they must form a Professional LLC (PLLC) or professional corporation, which subjects them to special rules. In some states (like California), even PLLCs aren’t allowed for certain professions, forcing those professionals to choose a corporation or partnership.
• Banking and Insurance Exceptions: Banks, insurance companies, and some financial institutions generally cannot form as LLCs. These industries are heavily regulated and often required to be corporations or other specific entity types. State laws typically exclude banking and insurance businesses from LLC eligibility due to the need for stricter oversight and capital requirements.
• No Public Stock Offerings: An LLC cannot issue shares of stock like a C-corporation. That means you can’t take an LLC public on the stock market in the way large corporations do. While an LLC can have many members (even hundreds in certain cases), its ownership is represented by membership interests, not freely tradable stock. This can limit an LLC’s ability to raise capital from the public or attract certain investors who prefer easily transferable shares.
• Potential Limited Life: By default, some state laws in the past caused LLCs to dissolve when a member left or died. Modern statutes and good operating agreements address this, allowing continuity. However, if you don’t plan for it, an LLC could end due to member withdrawal in certain cases. It’s crucial to specify in the operating agreement that the LLC will continue if an owner departs.
• Personal Liability Still Exists in Some Cases: Limited liability isn’t absolute. If an owner personally guarantees a loan or debt for the LLC, that owner is liable if the LLC defaults. Also, owners are always personally liable for their own wrongful actions (for example, if you personally injure someone or commit fraud, you can’t hide behind the LLC). Courts can “pierce the corporate veil” of an LLC in cases of serious misconduct or if the LLC is just an “alter ego” of the owners (e.g., no separate finances or records).

In summary, LLCs can’t do things that break state or federal law, and there are certain fields where an LLC structure is off-limits. Aside from those exceptions, an LLC has free rein to operate any lawful business and leverage the benefits of being a separate entity.

Tax Considerations: Flexible Taxation and Advantages of LLCs

Taxes are a major part of what an LLC can do for you: flexibility is the key word. The LLC itself is flexible in how it’s taxed, and this can be a big advantage for business owners.

By default, an LLC is not a tax-paying entity at the federal income tax level. Instead, it’s treated as a “pass-through entity.” For a single-member LLC, the IRS ignores the entity (calling it a disregarded entity) and all profits or losses are reported on the owner’s personal tax return (Schedule C, in most cases). For a multi-member LLC, the default is partnership taxation – the LLC files an informational partnership tax return, but it doesn’t pay tax as a company. Instead, it issues K-1 forms to each member for their share of the profit or loss, which the members then report on their personal returns.

This pass-through setup means no double taxation on profits, unlike a standard C-corporation where income can be taxed at the corporate level and again as dividend income to owners. LLC members only pay taxes once on the LLC’s earnings (on their personal returns).

However, LLCs also have the option to choose how they’re taxed. An LLC can elect to be taxed as an S-Corporation or even a C-Corporation if it makes sense for the business. Electing S-Corp taxation (by filing IRS Form 2553) can save owners money on self-employment taxes by allowing the owners to be treated as employees for salary purposes. In that scenario, part of the income is taken as salary (subject to payroll taxes) and the rest can be distributions not subject to self-employment tax. This strategy is often used by profitable small LLCs to reduce overall tax burden, while still retaining LLC legal structure at the state level.

A few more tax considerations for LLCs in the U.S.:

• Self-Employment Tax: By default, if you’re an active member of an LLC (like you work in the business), the IRS usually considers the earnings self-employment income. This means paying self-employment tax (Social Security/Medicare) on your share of the profits. This is similar to a sole proprietor. The S-Corp election mentioned can mitigate some of this, but comes with additional payroll paperwork.
• State Taxes and Fees: Some states impose annual fees or franchise taxes on LLCs. For example, California charges an $800 annual franchise tax for LLCs (regardless of profit), and additional fees if revenue is high. Other states may have modest annual report fees or no extra taxes. It’s important to know your state’s costs. Delaware and Nevada are popular for business formations due to business-friendly rules, but if your LLC operates elsewhere, you’ll register in that state as well.
• Tax Deductions: An LLC can write off business expenses just like other businesses. This includes equipment, office expenses, travel, marketing, etc. The advantage is you clearly separate these expenses in the LLC’s accounting. Many small business owners find they can better organize their deductions through an LLC structure. Also, if you have a home office used for the LLC’s business, the LLC can reimburse you or you can take a home office deduction if you’re a single-member LLC.
• Losses and Adjusted Gross Income: If your LLC operates at a loss in early years, those losses can often offset other income on your personal tax return (subject to certain IRS rules like the passive activity or at-risk rules). This pass-through of losses can ease the financial pain of a new business by reducing your overall tax in those years.

In short, an LLC offers tax flexibility that can be tailored to your needs. Many consider this one of the strongest advantages of the LLC structure, alongside liability protection. It’s wise to consult with an accountant or tax professional to decide which tax status benefits your situation, but know that the LLC gives you options that a sole proprietorship or standard corporation might not.

Avoid These Pitfalls: Common LLC Mistakes and Misconceptions

LLCs are straightforward, but there are pitfalls to avoid. Here are common mistakes or misunderstandings business owners should watch out for:

• Mixing Personal and Business Funds: Failing to keep the LLC’s finances separate from personal accounts is a big mistake. Always use a dedicated business bank account. If you commingle funds, you risk losing liability protection because a court could decide your LLC isn’t truly separate.
• No Operating Agreement: Some small LLCs skip writing an operating agreement (the internal document that outlines ownership percentages, roles, and rules). Even if not required by law for single-member LLCs, it’s wise to have one. For multi-member LLCs, an operating agreement is crucial to prevent conflicts. It spells out how decisions are made and what happens if someone leaves, among other things.
• Ignoring Compliance and Filings: Once your LLC is formed, you must maintain it. This includes filing annual reports or statements with the state (in many states), paying any required fees or franchise taxes, and keeping a registered agent on file. Letting these lapse can lead to the state dissolving your LLC or penalty fees. Mark your calendar for these important deadlines.
• Misunderstanding Tax Obligations: New LLC owners sometimes think that if the LLC didn’t make much money, they don’t need to file taxes. Even if an LLC has no income or is at a loss, you still need to file the appropriate tax returns (or include it on your personal return for a single-member LLC) each year. Also, if profits are passed through, remember to set aside money for taxes since it won’t be automatically withheld.
• Assuming Absolute Protection: Limited liability has limits. Some owners mistakenly believe having an LLC means they can never be sued personally. In reality, if you personally injure someone or commit malpractice or fraud in the course of business, you are still personally liable. Additionally, if you personally sign a contract or loan as yourself (not as the LLC) or give a personal guarantee, you’re on the hook. Use the LLC properly (always sign contracts as “[Your Name], Managing Member of [LLC Name]”) and maintain good insurance for your business to cover risks.
• Not Getting Professional Advice When Needed: DIY formation is common with LLCs (and often fine), but if you have unusual circumstances or growth plans (like multiple partners, complex profit splits, or plans to bring in investors), consult with an attorney and accountant. They can ensure your operating agreement and tax setup are optimized. Skipping this can cause costly issues later, like disputes among members or tax inefficiencies.

By being aware of these pitfalls, you can avoid them and ensure your LLC operates smoothly as intended. Properly maintained, an LLC will provide the protection and benefits you expect.

Speaking the Language: Key LLC Terminology Explained

As you navigate LLCs, you’ll encounter specific terms. Here are key pieces of terminology and their meanings:

• Limited Liability: The legal principle that owners (members) are not personally responsible for the business’s debts or lawsuits. If the LLC fails or is sued, your personal assets are generally protected.
• Member: An owner of the LLC. Members can be individuals or even other companies. You can have one member (single-member LLC) or many members (multi-member LLC).
• Operating Agreement: An internal document that outlines how the LLC is run. It covers ownership percentages, how decisions are made, how profits and losses are shared, and what happens if a member leaves. It’s like a partnership agreement for an LLC. Not filed with the state, but very important.
• Articles of Organization: The document filed with the state government to officially create the LLC. It typically includes the LLC’s name, address, registered agent, and sometimes member/manager names. Once approved, the LLC is legally formed.
• Registered Agent: A person or company designated to receive legal documents (like lawsuit papers or official mail) on behalf of the LLC. Every LLC must have a registered agent with a physical address in the state of formation (and in any state where it’s registered to do business).
• Pass-Through Taxation: A tax concept where the business itself isn’t taxed on its income. Instead, the profits (or losses) pass through to the owners’ personal tax returns. LLCs have pass-through taxation by default (unless they choose otherwise).
• Disregarded Entity: What the IRS calls a single-member LLC that hasn’t elected corporate tax status. It means the IRS “ignores” the separate entity for tax purposes and just taxes the owner directly on the business income.
• K-1 (Schedule K-1): A tax form issued to members of multi-member LLCs (taxed as partnerships or S-corps). It reports each member’s share of the LLC’s income, deductions, and credits, which the member uses to file their personal taxes.
• Manager-Managed vs. Member-Managed: Two management structures for an LLC. Member-managed means all members jointly manage the company (typical for small LLCs). Manager-managed means the members appoint one or more managers (who can be members or outsiders) to handle daily operations, similar to a CEO or director. This is often used if some owners are passive investors.
• Series LLC: A special type of LLC available in certain states where one LLC can be divided into multiple “series” or cells, each with its own assets and liabilities. It’s like having multiple LLCs under one master LLC, often used in real estate or investment funds. (This is advanced and only available in some jurisdictions.)
• Franchise Tax: A state levy that some states charge to LLCs (and other entities) for the privilege of doing business in that state. It’s not related to franchising a business; rather, it’s often a flat fee or tax based on company revenue or assets. For example, Delaware and Texas have franchise taxes, and California has an annual LLC tax.

Knowing these terms helps you understand legal and financial discussions about LLCs. It’s the lingo you’ll see in documents and conversations with attorneys or accountants.

LLCs in Action: Real-World Examples

Sometimes it helps to see how an LLC works in a real scenario. Here are a few real-world styled examples demonstrating what an LLC can do and how it benefits its owners:

• Tech Consultant Startup: Maria is a freelance software developer who creates a single-member LLC, “MariaDev LLC,” for her consulting business. She signs all client contracts in the LLC’s name. One day, a client refuses to pay and there’s a contract dispute. MariaDev LLC is able to sue the client for breach of contract. Because Maria used the LLC for her business dealings, her personal finances stay out of the lawsuit. This example shows the LLC can enter contracts and take legal action, shielding the owner from direct personal involvement in business disputes.
• Family Restaurant Business: John and Lisa open a small restaurant as “Sunset Diner LLC,” with both of them as members of the LLC. They choose to be member-managed and split ownership 50/50. The LLC obtains a bank loan to renovate the space, and John and Lisa don’t have to cosign personally because the business has good credit and assets. Unfortunately, a customer has an allergic reaction at the diner and sues for medical costs. The case is against the LLC (Sunset Diner LLC), and the diner’s insurance handles it. John and Lisa’s personal savings and home are not at risk from the lawsuit. This shows how an LLC with multiple owners can operate a general business, take loans, and provide liability protection to its members.
• Real Estate Investment: A group of three friends form “Treeline Investments LLC” to purchase and flip houses. They structure it as manager-managed, appointing one friend with the most experience to manage daily operations. The LLC buys a house, fixes it up, and sells it. All transactions (buying materials, hiring contractors, selling the property) are done under the LLC’s name. Each friend gets a share of the profits through the LLC. When they decide to keep a property as a rental, the rental income flows through the LLC to them. They also realize that if a tenant ever sues for an injury on the property, Treeline Investments LLC will be the defendant, not them individually. This example highlights an LLC’s use in real estate, allowing multiple investors to collaborate and share profits, limit liability, and streamline property ownership under one entity.

These examples underscore how LLCs function in practice—handling contracts, lawsuits, ownership of assets, and sharing of profits, all while insulating the people behind the business from direct risk.

LLC vs. Other Business Structures: How It Stacks Up

How does an LLC compare to other common business structures? Here’s a quick look at the differences so you can understand what an LLC offers:

• LLC vs. Sole Proprietorship: A sole proprietorship is just you doing business under your own name (or a DBA). It’s the default if you never register any entity. Unlike an LLC, a sole proprietorship does not create a separate legal entity. That means no liability protection—if your business is sued or has debts, it’s 100% on you personally. LLCs require some setup and fees, but they give you that personal liability shield and a formal structure, which a sole prop lacks. Tax-wise, a single-member LLC is taxed the same way as a sole prop by default, so no change there, but all the legal benefits are gained with an LLC.
• LLC vs. Partnership: A general partnership is like a multi-owner sole proprietorship—two or more people doing business together without an entity. Partnerships offer no liability protection for general partners; each partner is personally liable for business obligations (even those incurred by the other partner!). By contrast, a multi-member LLC protects all its members from the business’s liabilities. Both are flexible and have pass-through taxation, but an LLC is usually the safer choice due to liability concerns. There are also Limited Partnerships (LPs) and Limited Liability Partnerships (LLPs) in some industries, but those are more specialized. Generally, an LLC is simpler and provides broad protection for all owners.
• LLC vs. C-Corporation: A C-corporation (C Corp) is the traditional corporation structure. Like an LLC, a C Corp is a separate entity that offers limited liability to owners (shareholders). However, corporations have more formal requirements: bylaws, a board of directors, shareholder meetings, and minutes. They can also issue stock and are often better for raising capital from investors or going public. The trade-off is double taxation for C Corps (the company pays corporate tax on profits, and shareholders pay tax again on dividends). An LLC avoids double taxation with pass-through, unless you choose to be taxed as a corporation. For small to mid-sized businesses, LLCs are usually easier to manage. For businesses seeking venture capital or eventual public stock offerings, a corporation might be more suitable.
• LLC vs. S-Corporation: This comparison is a bit confusing, because S-Corporation (S Corp) is not a type of entity, but a tax election available to corporations or LLCs. Many people compare “LLC vs S Corp” because they hear about tax benefits. Here’s the breakdown: An LLC can elect to be taxed as an S Corp if it meets IRS criteria (U.S. owners, under 100 shareholders/members, etc.). By doing so, the LLC continues to operate as an LLC legally (no need for corporate formalities) but for tax purposes it splits owner income into salary and distributions, potentially saving on self-employment tax. A corporation can also elect S Corp status for the same tax benefits, but it still has to run as a corporation. In short, LLC vs S Corp isn’t apples to apples: rather, an LLC can become an S Corp for tax advantages while keeping its simpler LLC structure. Many small business owners start as an LLC, then elect S Corp taxation once the business is consistently profitable.
• LLC vs. Nonprofit: A nonprofit organization is usually formed as a nonprofit corporation (and then applies for 501(c)(3) or other tax-exempt status). An LLC is typically a for-profit business structure. You generally wouldn’t choose an LLC for a charity or nonprofit purpose. However, in some cases an LLC can be owned wholly by a nonprofit or multiple nonprofits, effectively functioning in a charitable way, but that’s an uncommon setup. If your goal is a charitable, tax-exempt entity, an LLC isn’t the right choice.

Each structure has its place, but the LLC tends to hit a sweet spot for many: it’s protective, flexible, and relatively simple. That’s why it’s a preferred choice for new businesses across industries, unless specific circumstances make another structure more advantageous.

Illustrative Scenarios: Three Popular Ways to Use an LLC

LLCs can be used in various ways. Here we illustrate three of the most popular LLC scenarios side-by-side, to show how flexible this structure is for different needs:

Each scenario shows the adaptability of LLCs—from a one-person consultancy to a multi-owner enterprise, to a vehicle for investment holdings. The structure molds to the needs of the business and owners while providing the core benefit of limited liability in all cases.

FAQ: Common Questions about LLCs

Q: What can an LLC do that I can’t do as a sole proprietor?
A: An LLC lets your business act as a separate legal entity. It can own assets, sign contracts, and take on debts in its own name, protecting your personal assets from business liabilities.

Q: Can a single person form an LLC, and will it really protect me?
A: Yes, single-member LLCs are allowed in all states. They provide liability protection just like multi-member LLCs, as long as you keep the business separate and follow the rules.

Q: In which industries should I use an LLC?
A: Almost any industry can use an LLC—common ones include real estate, consulting, e-commerce, retail, and services. Exceptions are banks and insurance companies, which usually can’t be LLCs by law.

Q: How is an LLC taxed by default?
A: By default, a single-member LLC is taxed as a sole proprietorship (pass-through to the owner’s personal taxes). A multi-member LLC is taxed as a partnership (pass-through to each member’s taxes).

Q: Can an LLC choose to be taxed differently?
A: Yes. An LLC can elect to be taxed as an S-Corp or C-Corp if beneficial. This is done by filing a form with the IRS, allowing flexibility in how the business’s income is taxed.

Q: What are the biggest advantages of an LLC?
A: The major advantages are limited personal liability for owners, flexible taxation (to avoid double tax), simple management requirements (less formality than a corporation), and adaptability for many business types.

Q: What are the disadvantages or limitations of an LLC?
A: LLCs can face self-employment taxes on all earnings (unless an S-Corp election is made). They can’t issue public stock, and some states charge annual LLC fees. Also, not all businesses (like banks or professional practices in some states) can use LLCs.

Q: How does an LLC protect my personal assets?
A: If someone sues your business or if the business can’t pay its debts, only the LLC’s assets are targeted. Your personal bank account, home, or other personal assets are generally off-limits, barring fraud or personal guarantees.

Q: Can I convert my sole proprietorship or partnership into an LLC easily?
A: In most cases, yes. You’d form an LLC with your state and then transfer business assets, contracts, and accounts into the LLC’s name. It’s a process, but straightforward. Many small business owners upgrade to an LLC as they grow.

Q: Is an LLC or S-Corp better for a small business?
A: They’re not mutually exclusive—an LLC can elect S-Corp taxation. LLC (legal structure) gives simplicity and liability protection. S-Corp (tax status) can provide tax savings on self-employment taxes. Many start as LLC (default tax) and switch to S-Corp taxation when it makes financial sense.