Everything You Need to
Know About
S-Corporation
you want and kick it off!
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.