Friends,
Last week, we examined various business structures and their effects as an owner. Not only is the structure of the business important but so is the tax status. This week, we wanted to explore how electing S-Corp status for your business could be beneficial. The article linked below highlights some advantages of having your business taxed as an S-Corp.
Stipulations for S-Corps
- The business must currently be structured as a C-Corp or LLC
- No more than 100 shareholders in the company
- Only have one class of stock
- Stock cannot be held by a partnership or another corporation
- Non-resident alien shareholders are not allowed
Tax Advantages and Other Benefits to Business Owners
- Shareholders can deduct their share of losses on personal tax returns
- Conversely, profits will flow through to personal tax returns, no matter if they are distributed or not
- Distributions from S-Corps are only subject to income tax (avoiding employment taxes)
- S-Corps can use stock to compensate key employees
We’re happy to discuss (along with a tax professional) the decision to elect S-Corp status for your business.
Andrew
Source: S Corp Election - Electing S Corp Status