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S-Corporations offer you a number of significant tax advantages whilst retaining ownership flexibility. S-Corp is also known as a 'Subchapter' or 'Small Business' Corporation. By its name, it's clear that S-Corp were designed with the purpose of supporting and creating small businesses.
With multiple people running a company, S-Corp becomes the most suitable option as it allows for members to act as employees too. A great perk with an S-Corp is the company profits regulated as cash dividends for the members. Its tax status also makes for a highly preferable option!
Do you run a family-owned business, or a business on a small-scale? If your answer is yes, then S-Corporation is the structure you should choose for your company! It provides you security options in protecting your personal assets and minimizes the amount of taxes.
In S-Corp, shareholders are not held responsible for the company’s liabilities on a personal level, nor its debts. Creditors are unable to go after the shareholder’s personal assets in case of recovering debt. You also save a lot by not being subjected to pay double taxations! With S-Corp, transferring ownership is also made easier!
The biggest drawback of S-Corp is the limit on number of shareholders. You can only have under a 100 shareholders in your company. Moreover, as an S-Corp owner you could be subjected to re-characterizing your income and paying higher taxes if you are not fairly characterizing IRS payments.
S-Corp make use of pass-through taxes which means business income is first passed through the shareholders without being taxed at a corporate level. Meanwhile in C-Corporation, double taxations are applied by the government. Additionally, unlike C-Corp which do not have a limit on the number of shareholders, an S-Corporation can only have less than a 100 shareholders.
Corporations offer more clout in attracting investors and make doing business easier with other companies.
Corporation separate your assets from being at risk in case of your business getting sued or going into debt etc.
C-Corp have no limits on the members having shares in the company. Whereas with S-Corp you have a limit of about a 100 shareholders.
You can switch to a C-Corp by gaining majority shareholder consent in doing so before official changing the status of your corporation with the IRS.
There are many advantages and disadvantages to both! Get in touch with Bizncorp to help you decide which options suits your business needs!
S-Corp make use of 'pass-through taxes', meaning the income is circulated amongst shareholders before corporate taxations.
The government imposes taxes on business revenue and requires shareholders to pay taxes on their dividends.