I went to a website and pulled down the Frequently Asked Questions about LLCs and here is what I discovered:   http://www.bizfilings.com/learning/llcfaq.htm

What are the advantages of an LLC
LLCs offer numerous advantages.

Pass-Through Taxation : LLCs allow for pass-through taxation. This means that earnings of an LLC are taxed only once. The earnings of an LLC are treated like the earnings from a partnership, sole proprietorships and most S corporations.

Limited Liability: The LLC owner’s liability is generally limited to the amount of money which the person has invested in the LLC. Thus, LLC members are offered the same limited liability protection as a corporation’s shareholders.

Flexible Management Structure and Flexible Ownership is Permitted: Like general partnerships, LLCs are generally free to establish any organizational structure agreed on by its members. Thus, profit interests may be separated from voting interests.

Should I choose an LLC or an S corporation?
While the S corporation’s special tax status eliminates double taxation, it lacks the flexibility of an LLC in allocating income to the owners.
An LLC may offer several classes of membership interests while an S corporation may only have one class of stock.

Any number of individuals or entities may own interests in an LLC. However, ownership interest in an S corporation is limited to no more than 75 shareholders. Also, S corporations cannot be owned by C corporations, other S corporations, many trusts, LLCs, partnerships or nonresident aliens.

LLCs are allowed to have subsidiaries without restriction. S corporations are not allowed to own eighty percent or more of another corporation’s shares

What then, you might ask, are the disadvantages of an LLC over a sole proprietorship or an S-Corporation??  Well, money, of course.  Start up costs are about greater, and then it costs anywhere from $1,000 to $1,500 per year for accounting and income tax preparation. 

One of the most important things you can do when starting up your business is to get the structure right the first time. Now that we have covered the types of legal corporate structures, let me show you the tax consequences for the same income on different types of returns.

Using a net profit figure of $22,371 (I used this figure because a tax client of mine had this exact figure on his return last year), I have translated that same amount to an S Corporation, a C Corporation, and a Sole Proprietorship. Let me show you the tax difference:

Based on this example, I’m sure you can now readily see the benefits of incorporating your business. Now, you cannot always assume that just because the tax consequence might be lower that an S Corporation is the way to go. A C Corporation provides protection of assets that an S Corporation never will.

If you have a small business, or are contemplating starting one, then an S Corporation will probably do the trick until you burst at the seams from growing pains. You can always reorganize and change your corporate structure. And, the cost of incorporation is so small that it would be foolish to ignore this or put it off.

All examples used in this chapter reflect my home state of Florida, City of Tampa, and county of Hillsborough. Just remember this: As long as you do not have a store front, you can incorporate in whichever state you like, whether you are doing mail order, internet sales and the like. Cruise around and see what individual states charge in the way of incorporation fees.