S-Corporation

A "subchapter S" Corporation, also known as a S-Corporation, is a corporation that elects a special tax status through the IRS. The Subchapter S corporation's tax election strategy enables the owners of the corporation to "pass through" the profits of the corporation, directly to their personal tax returns, thus avoiding the "double taxation" problem which many C-Corporations face.

For example, a C-Corp must pay corporate taxes on its profits. After the corporation pays its own taxes, it may distribute the remaining funds as dividends to its owners, but the owners must then pay personal taxes on that income - a situation commonly known as "double taxation." With the many S-Corporation advantages, however, the corporation's profits "flow through" to the personal tax returns of its owners - the income is taxed only once, a tremendous S-Corporation benefit rather than a C-Corporation. It is important to note, however, that if the owners of a S-Corporation are working for the corporation, then the corporation must pay them a salary that is considered "reasonable compensation” and must pay Social Security/payroll taxes on that salaried "reasonable compensation."

Forming an S corporation

S corporation is a corporation that elects a special tax status through the IRS. In a S-Corporation, the profits and losses of the business passes through to the corporation owner's personal income tax. So, there is no double taxation threat.

The process of forming an S corporation involves the filing of articles of incorporation or certificate of incorporation with the appropriate state agency. You can also consult financial advisors in order to know more about the entire procedure of forming an S corporation. Our website lists the number of pricing options that you can select as per your requirement.

Why choose a S-Corporations?

When managed properly, following are the S-Corporation benefits:

Similar to a C-Corporation, owners of S-Corporations have limited personal liability for business conducted by the corporation, including debts incurred by the corporation.

Another S-Corporation advantage is that there is no double taxation threat because the corporation is not a separate taxable entity.

Owners of a S-Corporations can save on employment taxes by taking distributions instead of salary, but must pay themselves a "reasonable compensation."