THE ADVANTAGES OF FORMING AN S-CORP
Southern California controller services knows the value of an S-Corp, here are some of the advantages if your thinking of going this route.
An S-Corporation is a special tax status for which your business can apply with the IRS after it is formed. An S-Corp is treated as a pass-through for federal tax purposes. This gives the business several advantages when it comes to how tax regulations are applied to the business.
Avoid Double Taxation While Structured as a Corporation
Instead of both the business and the shareholders paying federal taxes on the same business income, the S-Corp business is not taxed on its profits. The taxes are passed through to the shareholders. This frees more assets for the company and can increase profits. This is similar to an LLC, but as a corporation, the S-Corp is not required to pay self-employment taxes either.
Protection of Owner’s Personal Assets
The owners of an S-Corp have limited liability for the actions or debts of the company unless they have personally signed papers taking responsibility. Creditors and banks cannot come after the owners’ personal possessions or assets if the business falls into financial difficulty.
Enable Better Long-Term Planning
Unlike an LLC, S-Corps are independent entities and will continue to exist even if the original owner or owners leave. If the owner does decide to sell out or leave, their tax liability is less than if they were selling a C-Corp.
Easier to Transition Ownership
If the founder or owner needs to leave at some point, the transition of ownership is easily handled by selling stock. This is far less complicated than the requirements some other forms of business incorporation require.
If this sounds like a helpful structure for your business, consider looking into whether your business is eligible for S-Corp status. If your not sure if this is a good fit for your business southern California controller services like AccountingX can help you determine the correct route to take. For more information, if your business is eligible click here.
