[MRM]

LLCs can own S Corps. That’s one of their main advantages. LLCs are pass though entities so the owner of the membership units pays tax on the LLCs profits as ordinary income but benefits from the corporate veil. S corps have to pay tax as its own entity. So someone could be self employed with an S Corp drawing a salary and the S Corp pays the Social Security and other payroll taxes so the employee doesn’t pay self employment tax. The profits could be distributed from the S Corp to the LLC as dividends and then distributed to the LLC membership unit owners.

It sounds like the suggestion is that having the S Corp pay the employment taxes and taking dividends and distributions through the LLC might be more tax advantages than having just a pass through entity like an LLC where everything is ordinary income or just an S Corp where any profits at the end of the year get taxed before dividends can be distributed.