TAX PLANNING-Business S-Corp

Should I Run My Small Business as an S Corp?

An S Corporation (Small Business Corporation) is a business elected for S Corporation Status through the IRS.

This status allows the taxation of the company to be some what similar to a partnership or sole proprietor as opposed to paying taxes based on a corporate tax structure.

Pros of S Corporation Status

No Corporate Tax: Allows you to avoid "double taxation".

Reduce Taxable Gains: An S corporation could have reduced taxable gains when the business is sold.

Write off Start-up Losses: You will have many expenses and losses - These can be offset against your personal income.

Liability Protection: S corporations offer limited protection against liabilities.

Cons of S Corporation Status

One Class of Stock: Choosing an S Corporation status will limit your organization to issuing one class of stock.

Less Attraction for Outside Investors: If you will need venture capital, the regular corporation structure will be a better choice.

Tax Filing: You avoid corporate taxes but will still have to file a tax return every year.

Corporate Meetings: Requirements of having regular meetings and maintaining company minutes. Consider the added time in operating an S Corporation.