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.
A Corporate Direct is a corporation which decided to pay taxes like a flow-through entity like a limited partnership or LLC. 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. This is because the structures do not offer asset protection and it is possible to lose personal belongings in case of a court issue.
The advantages of S Corporations have incorporated limited liability to the management and shareholders. Both in management and state residency requirements are not needed. No court is helpful in case of protection of personal liability should you lose personal effects like your home, car and nest egg. The disadvantages on the other hand state that at the level of shareholders the shares are exposed to sale and seizure in a court of law. Shareholders should be US residents. Learn more about this services here.
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 owners and the shareholders will be protected at the same time the corporation is expected to supervise the activities of the business. Should you at some point decide you want to go the S Corporation way, and go public by flowing through the initial loses.
One benefit is that business owners enjoy 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. However, they will be taxed on themselves. Nevertheless this is subject to Medicare and social security that is often paid half by the corporation and the other half by the employee. The savings that are made as a result of no tax on self-employment and only come in as soon as the S-corp is making a considerable return and that there are some profits that can be paid after the statutory have been paid. Get more details here: https://en.wikipedia.org/wiki/Incorporation_(business).