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- An S corporation can have up to 100 shareholders.
- S corporations limit ownership to individuals, trusts, and estates.
- An S corp separates you from your company operationally and for taxes.
- S corps pass income and losses to owners’ personal returns.
- Many small businesses use S corps, with 70% having just one owner.
- Owners claim company profits on tax returns, avoiding C corp double taxation.
- To pay yourself as an owner, first pay a reasonable salary and distribute remaining profits to shareholders.
- To be an S Corporation, your business needs to be set up as a corporation by submitting necessary documents.
- All shareholders must sign and submit Form 2553 for S Corporation designation.
- Shareholder restrictions for S corps: no more than 100 shareholders, and shareholders must be US citizens/residents.
- S corporations have limitations on ownership compared to C corporations.
- LLCs allow more flexibility in ownership and profit allocation than S corps.
- LLCs can have unlimited members, corporations, and partnerships.
- LLCs offer the advantage of no limit on the number of owners.
- Creating an S Corporation can provide tax savings and limited liability for shareholders.
- Pass-through taxation in S corporations avoids double taxation associated with traditional corporations.
