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I’m ready to start my horse business! LLC vs S-Corp: Which Should I Choose?

Updated: Jun 13

LLC versus S-Corp

So you’ve decided you want to start a horse business. I am so excited and can’t wait to hear more about it. 


Perhaps you even know the name already … 


The next step is registering your business with your Secretary of State (find links to the Secretary of State pages for all 50 states in the US below) and potentially with your city or the city you do business in. This formality will open many new doors, from reducing your legal risk with insurance to buying product components wholesale (for product-based businesses) and opening a bank account for your business to accept transactions. The two most popular business structures in the horse industry are S-Corporation (S-Corp) and Limited Liability Company (LLC). Both popular business structures in the United States offer distinct advantages and disadvantages. Here are a few elements to consider when considering a LLC vs S-Corp as it pertains to your new business:


Taxation: Both S-Corps and LLCs are considered pass-through entities for tax purposes, meaning the profits and losses of the business are passed through to the shareholders and reported on their individual tax returns. S-Corps are not subject to corporate income tax. LLCs have the option to elect to be taxed as an S-Corp or C-Corp if it's advantageous for tax planning purposes.


An example of how this may impact your business: if you teach or train at a property that you own, as an LLC many of the tax benefits tied to deducting the costs associated with improving your property where you do your business will later be taxed or considered profit in the company if you ever sell your property. The profits generated from selling the property will impact the bottom line in your business and you run the risk of double taxation (the corporation would be taxed on the money it made on assets sold that are allocated to the business, and you would be taxed again on the share of the profits that went to you). Meanwhile, as an S-Corp you have the opportunity to rent your property from yourself for the benefit of your business (this applies to paying yourself a salary, too). Improvements in the property can still be taken as a business experience, or cost, if you can prove that the improvements were made for the sake of the business. When you sell the property in the future, however, as a renter you will see any profits hit your personal income taxes and not both your personal and business-related taxes. Meanwhile, if you don’t have a lot of assets in your business the simpler LLC may be the better option for you.


Formalities: S-Corps typically have more formalities to maintain, such as holding regular shareholder meetings, keeping detailed corporate minutes, and following other corporate governance requirements. LLCs have fewer formalities compared to S-Corps, although good record-keeping is still recommended for legal protection.


Liability Protection: LLCs and S-Corps provide limited liability protection to their owners, meaning the personal assets of shareholders are generally protected from the debts and liabilities of the business.


Cost and Complexity: Setting up and maintaining an S-Corp can be more costly and complex compared to an LLC due to the additional formalities and requirements. That being said, oftentimes in businesses with significant assets, like horse businesses, and where a layer of separation is needed between you and the business, the benefits can far outweigh the costs.


Ultimately, the choice between an S-Corp and an LLC depends on various factors including tax implications, ownership structure, management preferences, liability protection, and state-specific regulations. Both are great options for horse businesses. 


If you have questions, want help determining the best choice for your business, or need help finding resources don’t hesitate to reach out. Little Bird Advising offers 1:1 business advising and a 30 minute complimentary consultation for horse business owners like you!


Happy Riding!



Secretary of State links by US State: 







































Pennsylvania: https://file.dos.pa.gov/ 



South Carolina: https://scbos.sc.gov/ 












Happy Riding!

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If you have questions, want help with your business operations, or need help finding resources don’t hesitate to reach out. Little Bird Advising offers business coaching for equine business owners like you!


Blog posts from Little Bird Advising are not meant to replace individual professional legal advice.


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