Understanding an S Corporation and whether it is a Good Fit for you

 To decide if an S Corporation is a good fit for you or whether it is right more so if you are about to start a new business or if you want to change the existing one from sole proprietor to general partnership read on to know some factors which can be affected such as taxes, protection of assets and shareholders numbers.  Apart from S Corporation, C Corporations and Limited Liability Companies are the three options that people choose from when they want their business to be incorporated. Clickhere for more info: https://www.corporatedirect.com/starting-a-business/difference-llcs-corporations.

 LLCs, S Corporations and limited partnerships are corporations that chose to pay their taxes like flow-through entities.   There is no risk of double taxation since shareholders are assisted in their payment of taxes on a personal level, not on the corporate level through the ‘S Election’ that is found in IRS code.   If you want to know if you have and entity structures and in case you are in the sole proprietor or general partnership this is not advised.    The reason being that there is no asset protection offered and it is easy to lose personal effects in a law court. Discover more on this link: https://www.corporatedirect.com/start-a-business/entity-types/s-corporation.

Now the S Corporations advantages include limited liability to shareholders and the management.   Both in management and state residency requirements are not needed.   You risk losing your personal effects as there is no personal liability protection and no court has helped in this.   On the other hand, the disadvantages of the shareholders level are that the shares risking being seized by a court of law or sold.

 In case you decide to form a corporation you are expected to file a document which will bring life to a legal entity that will have an IRS identity, business purpose, and name.  The corporation will oversee the business activities, and this protects the shareholders or owners.    It is advisable to form an S Corporation should you at one point decide that you would like to go public.

Business owners benefit from a no self-employment tax.  For S Corporation enjoy a taxation benefit which does not require shareholder to pay a tax on self-employment on the share profits of the business.   The taxes will be on them individually.  Nevertheless this is subject to Medicare and social security that is often paid half by the corporation and the other half by the employee.    So, the savings made from not paying self-employment taxes on the made profits and come in as soon as the S-corp is making enough and remaining with some profits even after the mandatory has been paid out. Click here for more info: https://en.wikipedia.org/wiki/Business_software.