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

So you’ve decided you want to start a horse business (or maybe you aren't sure if you made the right choice when setting yours up - if this is you, it's okay. You can always change your filing status in the next tax year to better align with your business). Either way, I am so excited and can’t wait to hear more about it. 

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 business structures offer distinct advantages and disadvantages in the United States. 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. Equestripreneur offers 1:1 business advising and a 30 minute complimentary consultation for horse business owners like you!

Secretary of State links by US State: 

Alabama: https://www.sos.alabama.gov/business-services 

Alaska: https://www.commerce.alaska.gov/web/cbpl/Corporations.aspx

Arizona: https://azsos.gov/business 

Arkansas: https://www.sos.arkansas.gov/business-commercial-services-bcs 

California: https://www.sos.ca.gov/business-programs/business-entities 

Colorado: https://www.coloradosos.gov/pubs/business/businessHome.html 

Connecticut: https://portal.ct.gov/sots/business-services/bsd 

Delaware: https://corp.delaware.gov/ 

Florida: https://dos.fl.gov/sunbiz/start-business/ 

Georgia: https://ecorp.sos.ga.gov/ 

Hawaii: https://hbe.ehawaii.gov/BizEx/home.eb 

Idaho: https://sos.idaho.gov/business-services-resources/ 

Illinois: https://www.ilsos.gov/departments/business_services/home.html 

Indiana: https://inbiz.in.gov/start-business/ 

Iowa: https://sos.iowa.gov/business/StartingABusiness/search.aspx 

Kansas: https://sos.ks.gov/businesses/register-a-business.html 

Kentucky: https://web.sos.ky.gov/ofx/ 

Louisiana: https://www.sos.la.gov/BusinessServices/StartABusiness/Pages/default.aspx 

Maine: https://www.maine.gov/sos/cec/corp/ 

Maryland: https://egov.maryland.gov/businessexpress 

Massachusetts: https://www.sec.state.ma.us/divisions/corporations/corporations.htm 

Michigan: https://www.michigan.gov/lara/bureau-list/cscl/corps 

Minnesota: https://www.sos.state.mn.us/business-liens/start-a-business/how-to-register-your-business/ 

Mississippi: https://www.sos.ms.gov/business-services-regulation 

Missouri: https://www.sos.mo.gov/business/corporations 

Montana: https://biz.sosmt.gov/forms/business 

Nebraska: https://sos.nebraska.gov/business-services/new-business-information 

Nevada: https://www.nvsos.gov/sos/businesses/start-a-business 

New Hampshire: https://www.sos.nh.gov/corporations-0 

New Jersey: https://www.nj.gov/treasury/revenue/gettingregistered.shtml 

New Mexico: https://www.sos.nm.gov/business-services/start-a-business/ 

New York: https://nyc-business.nyc.gov/nycbusiness/description/certificate-of-incorporation--new-york-state-corporation 

North Carolina: https://www.sosnc.gov/divisions/business_registration 

North Dakota: https://www.sos.nd.gov/business/business-services 

Ohio: https://www.ohiosos.gov/businesses/information-on-starting-and-maintaining-a-business/starting-a-business/ 

Oklahoma: https://www.okcommerce.gov/doing-business/startups-entrepreneurs/how-to-start-a-business/ 

Oregon: https://sos.oregon.gov/business/Pages/register.aspx 

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

Rhode Island: https://www.sos.ri.gov/divisions/business-services/ri-business/start-your-rhode-island-business 

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

South Dakota: https://sosenterprise.sd.gov/BusinessServices/Business/RegistrationInstr.aspx 

Tennessee: https://tnbear.tn.gov/Ecommerce/RegistrationInstr.aspx 

Texas: https://www.sos.state.tx.us/corp/do-business.shtml 

Utah: https://corporations.utah.gov/online-business-registration/ 

Vermont: https://sos.vermont.gov/corporations/registration/ 

Virginia: https://www.scc.virginia.gov/pages/New-Business-Resources 

Washington: https://www.business.wa.gov/site/alias__business/927/Small-Business-Guide.aspx 

Washington, DC: https://dlcp.dc.gov/service/get-business-license 

West Virginia: https://business4.wv.gov/Pages/default.aspx 

Wisconsin: https://onestop.wi.gov/OpenMyBusiness 

Wyoming: https://sos.wyo.gov/Business/StartABusiness.aspx 

Happy Riding!

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If you have questions, want help with your business operations, or want to learn more about the Equestripreneur Community, don’t hesitate to reach out. 

Equestripreneur offers coaching and community for equine business owners like you!

Learn more about author Kristin Bowers.

Blog posts from Equestripreneur are not meant to replace individual professional advice, which will best inform personal circumstances.