S CORPORATION

• Advantages of owning a S corp

   

  An S Corporation is a corporation that is usually formed mainly for tax purposes. The tax incentives include electing to pass corporate income, losses, deductions and credits away from themselves and onto shareholders so the owners and shareholders pay less or no federal taxes. They typically record this income on their personal tax returns so they are taxed individually rather than as a company because they believe it will benefit them initially and potentially in the future. There is a level of independence that comes with owning an S corporation which allows the owner of the business to operate separately from the shareholder. If a shareholder leave, the S Corporation continues to operate as is.

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• Disadvantages of owning an S Corp

   

  Common disadvantage of S corporations are that minutes are usually required to be kept from shareholder meetings because the IRS may look at these company’s tax returns and business efforts more carefully than a LLC. Typically the shareholders (anyone who owns stock in the business), must compensate themselves fairly or the corporate earnings they receive may be looked at as “wages”. Audit’s that determine issues here may make you pay taxes at a higher rate in the long run. An S Corporation can have no more than 75 shareholder.

• Forming a S Corp

   

  In order to file an an S Corporation is a unique businss entity and tax regulations may differ in your state as they do in New York and New Jersey for the owner of an S Corporation. This may not be right for your business and you should consult your attorney/accountant and or state regulations before you decide to form one. Because of the 1996 tax law, S Corporations can now own 80 or more percent of the stock of a regular C Corporation. Certain times, trusts, estats and tax-exempt corporations can be shareholders.

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