What is a Subchapter "S" Corporation?

Posted by Mitch Jackson at 5/21/2008 3:00 AM and is filed under Business Planning,Corporations,Business Litigation,Estate Planning,Business Formation,Business,Asset Protection

A subchapter "S" Corporation, also called an S Corporation, is a corporation that once incorporated, elects a special tax status.  The Subchapter S tax election enables the shareholder to pass through earnings and profits directly to their personal tax return.  If the corporation has a profit, the shareholder, if working for the company, must pay themselves wages that meet the standards of "reasonable compensation."

What are the main advantages of forming an S Corporation?

  • An S Corporation is said to have less risk from government audits as a corporation (as opposed to sole proprietor or LLC) 
  • Owners of an S Corporation have limited personal liability for business debts 
  • With an S Corporation, owners can use corporate losses to offset income from other states
  • Owners of an S Corporation can save on employment taxes by taking distributions instead of salary
  • Owners of an S Corporation can save on employment taxes by taking distributions instead of salary
  • With an S Corporation, there is no double taxation threat because the corporation is not a separate taxable entity.

Jackson & Wilson's Business Services Department  was founded to help individuals, entrepreneurs, small business owners, large companies (including officers and directors), services organizations and professionals (doctors, lawyers, accountants...) minimize exposure to lawsuits and maximize privacy and asset protection.  Contact us at your convenience via our toll free number at 800-661-7044 or via our "Other Services" page at www.jacksonwilson.com

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