“If you are working on something that you really care about, you don’t have to be pushed. The vision pulls you.”
– Steve Jobs
An S-Corporation is not one of the normal business formation types. It is a designation that can be made after an entity is formed for tax purposes.
A Sole Proprietorship is the easiest and fastest way to set up a new business if you are an individual starting out on your own with a low risk business plan.
Benefits of a Limited Liability Corporation (LLC)
Q: Are you concerned about being sued and potentially risking your personal assets?
A: Personal asset protection is the main reason most business owners opt to to establish as an LLC entity.
Q: Will you need to purchase property, large price tag equipment or incur an extensive amount of debt as part of your business startup costs?
A: If this applies to you, it is in your best interest to establish as your business as an LLC for business credit and to allow for potential shareholder investments.
Q: Do you have other owners or potential profit shareholders that are a part of your business?
A: Your entity must be established as either a corporation or partnership to accommodate additional shareholders and investors.
Reasons to Consider Filing for S-Corporation Designation
Q: Are you expecting to bring in a large amount of business
A: Obtaining the S-Corporation designation will allow busines owners to
avoid paying self-employment tax on company profit K-1 distributions.
Q: Considering paying owners a salary?
A: Most S-Corporations have owner-employees on the payroll earning a
reasonable salary in addition to their portion of the business earnings.
Q: Does your business model include investors or other
A: S-Corporations are required to file separate tax filings and the owner
distributions are passed through to the owners on K-1 forms in their
respective ownership proportion as dividend income.