Advantages of S-Corporations

Note:  All references to corporations in this blog post are referring to S-Corporations.

Corporations are formed under state law so you will need to refer to your state for specific, but in general the following are some of the advantages of establishing a S-Corporation:

• A S- corporation is a separate legal entity, which generally means that the shareholders are not liable for the corporation's debts; however many banks have the owners of S-Corporation's personally guarantee the loans of the corporation.  When you do this then you become personally liable for the corporation's debts.


• A shareholder can generally take losses up to their tax basis in the corporation.


• All profits and losses are passed through the corporation to the shareholders and taxed on the shareholder's individual return thus avoiding the potential of double taxation (please note shareholders are taxed on any profit whether or not the profits are distributed)


• Distributions from S-Corporations are not subject to self-employment taxes.  {Officers are required to take a reasonable salary and pay self-employment taxes on that salary.}

Tax law can change daily, please talk to your tax adviser before making decisions that will affect your taxes.