Why an S Corporation?
S Corporations provide significant protection from liability. In other words, partners are typically not personally responsible for the business's debts and liabilities. The biggest benefit, however, is that S Corporations still retain pass-through taxation which allows an owner to report income and losses on their personal tax returns.
Advantages:
The advantages of an S Corp include pass-through taxation, protection from liabilities and debts, and the ability to avoid the "double-taxation" that accompanies a C Corporation. The S Corp also has the advantage (not available to LLCs) of raising capital by the selling of stock. An S Corp, in many cases, appears more legitimate than an LLC or Sole Proprietorship. It also requires that profits are distributed depending on the stock-ownership of the partners in the company. In addition, S Corps are at a lower risk of audit and business expenses are often tax-deductible. Lastly, an S Corp provides the benefit of tax savings for owners, because partners are often classified as employees of the company.
WHAT ARE THE DRAWBACKS?
As with other entities, an Article of Incorporation must be filed with the state and certain fees must be paid in full. S Corps must also have bylaws, hold official meetings with shareholders and directors, and it must issue stock to the various partners.
ownership restrictions
S Corporations do have a threshold for meeting government requirements. There must be less than 100 owners, the owners must be US citizens, and the partners cannot be other corporations or trusts. In addition, S corporations can only have one class of stock, but they can have differing voting rights.
To get Started:
S Corporations can be more difficult, and cumbersome, to create than sole proprietorships, LLCs, or General Partnerships. To begin the process of creating an S Corp, please fill out the form below and one of our representatives will be in touch with you shortly: