LLC vs. S-Corp: What I chose for my first business
2025 is the year I’m finally establishing my first formal business! I’ve always been entrepreneurial growing up, juggling passion projects and side hustles, but I’m officially taking that next step to set up a business and turn it into my full time job.
But this process comes with LOTS of decisions, with one of the first ones being: LLC or S-Corp?
I’m building a company that connects college students to resources and peers that will help them level up in their educational and career journeys. For this type of business, I ended up choosing to proceed with an LLC rather than an S-Corp and here’s why:
1. As a first-time (and first-generation) entrepreneur who wants to focus on their business rather than getting caught up on research around bookkeeping and other rules, an LLC felt like a better, more flexible choice. S-Corps require more formal bookkeeping, often a board of directors and more, which isn’t applicable to me at this stage. Maybe it will be later, and if so I’ll work to convert my LLC into an S-Corp.
2. LLCs typically have lower initial and ongoing fees, which was important to me at this stage in my entrepreneurial journey.
3. Because S-Corps have more strict rules on things, I’d need to hire different people like a business accountant and potentially legal representation. My goal with my first business is to keep it low cost, so this isn’t a good fit for me at the moment.
This choice wasn’t hard for me to make. LLCs are, in my opinion, more approachable for first time entrepreneurs. It took me under a week and less than a few hundred bucks to set up my LLC, and I’m hoping that I’ll learn enough from this experience that I will feel more educated when making a business structuring decision for my next venture in the future.
But so far I’ve been loving my LLC! I know people with S-corps as well who find that better for their business, so do your research if you’re in this decision process to find what’s the right fit for you. :)
After finally deciding on an LLC for my first business, I thought the hardest part was over. But then came the realization that there's a whole world of official paperwork and filings to navigate! Terms like "BE & UCC" started popping up, and honestly, it felt a bit daunting at first. It’s part of the journey to formalizing your entrepreneurial dreams, and breaking it down makes it much less intimidating. So, what exactly are these acronyms, and why do they matter for your new business? Let's start with Business Entities (BE). When you establish an LLC, S-Corp, or any other legal structure, you're creating a business entity. Registering your BE with the state (like through the California Secretary of State, as seen in the BizFile screenshots) is the foundational step that confirms your business's legal existence. It's how your business becomes official in the eyes of the law, allowing you to operate, enter contracts, and manage liabilities. Then there are Uniform Commercial Code (UCC) Filings. These are primarily concerned with secured transactions. Imagine your business takes out a loan and uses its equipment or inventory as collateral. A UCC filing serves as a public notice that a creditor has a security interest in those assets. While a first-time, lean startup might not immediately need to file a UCC, understanding it is crucial, especially if you plan on seeking financing, purchasing assets on credit, or dealing with inventory. It’s about protecting both your business and your creditors. Luckily, much of this process can be simplified thanks to online platforms like BizFile Online provided by states such as California (bizfileonline.sos.ca.gov). This portal acts as a central hub for various business services. You can typically use it to search for existing business entities, file your initial Articles of Organization (for an LLC) or Incorporation (for an S-Corp), verify certificates, and yes, even manage UCC statements. It’s designed to make these often-complex legal requirements more accessible for business owners. You might have seen mentions of “BE & UCC bulk orders” – and yes, this is a thing, though perhaps not for every first-time entrepreneur. "Bulk orders" for BE and UCC services usually cater to businesses or legal professionals who need to process multiple filings simultaneously. For instance, if you're establishing several related entities or handling extensive secured transactions, this option allows for more efficient processing. For a single new business, you'll likely focus on individual filings, but it's good to be aware of the breadth of services available through platforms like BizFile. Beyond state-level filings, another critical step, highlighted in the IRS screenshot, is obtaining an Employer Identification Number (EIN) from the IRS. Think of an EIN as a Social Security number for your business. You'll need it for tax purposes, opening a business bank account, and if you plan to hire employees. The great news? It's free and can be obtained quickly online directly from irs.gov, usually in a single session. Navigating these official steps – from understanding BE and UCC filings to utilizing online resources like BizFile and securing your EIN – can seem overwhelming. But remember, they are essential for legitimately establishing and protecting your business. My advice based on my experience? Take it one step at a time, leverage the online tools available, and don't hesitate to seek advice from small business resources or a professional if you're unsure. It's all part of building a solid foundation for your entrepreneurial dream!
Saving this post for when I create my LLC 🙌🏻