Can One Person Be an S Corp?

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S Corporation Overview

  • An S corporation can have one to 100 shareholders.
  • Sole proprietors have unlimited liability.
  • S Corps offer limited liability protection.

S Corporation Benefits

  • S corp treatment benefits individual owners who are U.S. citizens, residents, or certain noncitizens.
  • All shareholders must have the same stock type.
  • An S corp can pay profits as salaries and distributions, with salaries required to be reasonable.

Tax Benefits of S Corporation

  • S corps don’t pay corporate taxes on their profits, passing them to the owners.
  • Owners are only taxed once, subject to their personal tax rate.

Considerations for Business Owners

  • There is no inherently “better” entity type between C corp, S corp, or LLC.
  • Choosing between an S corporation and an LLC depends on the nature, size, and goals of the business in question.

Ownership and Shareholders

  • An S corporation is required to pay owners a reasonable salary on which they will pay taxes.

IRS and Business Structures

  • The IRS has reasons for their requirements with regard to business structures and ownership.

Liability Protection Comparison

  • Both S corporations and LLCs provide personal liability protection to their owners.

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