S Corporations

An S Corporation is set up under Subchapter S of the IRS code. This means that the corporation is taxed differently than a C corporation, for which regular IRS taxing rules apply. In most cases, a business is taxed based on the amount of profit created from that business for the year. However, with an S Corporation, these rules do not apply, and the taxes are taken from the shareholder's income tax return. For this reason, filing as an S Corporation may be a good option for a sole proprietorship, or for a small business with partners who share equal responsibility.

Before you decide to file your business as an S Corporation, it is important to consider the pros and cons of this choice. For instance, filing as a C Corporation does provide limited liabililty for the business, as well as no restriction on the number of shareholders. There are also two levels of taxation with C Corporations, so these companies can sometimes save a substantial amount of money and retain substantial profit. If you file as an S Corporation, you are usually responsible for any damages to your property or business equipment, and you may also be liable for certain customer complaints and reimbursements.

Whether you're filing for your business yourself, or have a partner or two, you should carefully consider your taxing options before making a final decision. Some of the paperwork can be a little confusing, so it's best to talk to an attorney to get a thorough explanation of all terms and conditions before committing to anything. You can also do a little research on your own by logging on to sites like www.mycorporation.com, www.law-encyclopedia.com, and www.amerilawyer.com. This way, you'll find the answer to many legal questions you may have, and can even set up your corporation online to save time.

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