Indeed, owners often incorporate their businesses primarily to gain protection from personal liability. Accordingly, the members of an LLC will ordinarily not be liable for the LLC's debts. Other LLC Advantages Business owners who choose to incorporate often elect Subchapter S status for their corporations. Under Subchapter S, which is part of the IRC, a corporation pays no income taxes. Instead, the owners pay all taxes.
S corporations have several disadvantages.
The IRC regulations that govern S corporations limit the flexibility by which the owners may be compensated. For example, an agreement under which only one owner receives certain fringe benefits could violate the regulations, causing an immediate and automatic termination of the Subchapter S election. This could have disastrous income tax consequences. LLCs have much greater freedom to compensate their members than do S corporations. In addition, unlike the Subchapter S regulations, the regulations governing LLCs contain no provisions for the immediate or involuntary termination of LLC status.