S Corporations and LLCs are both “pass through” entities for federal income tax purposes. That is, owners are taxed on dividends/distributions; but the entity itself is not subject to federal income tax. And, as I mentioned in previous posts –on March 26, 2014, July 2, 2009 and June 3, 2009 –both an S Corp and an LLC protect owners from the debts of the entity.
But with respect to an owner’s personal debts–there is a big difference between a corporation and a limited liability company. If a creditor obtains a judgment against you, the creditor can generally get your S Corporation stock fairly easily. That creditor, however, can usually only get a charging order against your LLC interest.
So when deciding what kind of entity is best for your needs–keep in mind that a limited liability company will generally be preferable from an asset protection standpoint.