S Corporation

A subchapter "S" Corporation, also called an S Corporation, is a corporation that once incorporated, elects a special tax status. The Subchapter S tax election enables the shareholder to pass through earnings and profits directly to their personal tax return. If the corporation has a profit, the shareholder, if working for the company, must pay themselves wages that meet the standards of "reasonable compensation."

What are the main advantages of forming an S Corporation?

       An S Corporation is said to have less risk from government audits as a corporation (as opposed to sole proprietor or LLC)

      Owners of an S Corporation have limited personal liability for business debts

      With an S Corporation, owners can use corporate losses to offset income from other states.

       Owners of an S Corporation can save on employment taxes by taking distributions instead of salary.

      With an S Corporation, there is no double taxation threat because the corporation is not a separate taxable entity.