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S Corporations
A subchapter "S" Corporation, or simply S Corporation, is a corporation that elects a special tax status once incorporated. This tax election enables shareholders 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."
Advantages
- Believed to have a less chance of being audited by the government (as opposed to sole proprietor or LLC)
- Owners have limited personal liability
- Owners can use corporate losses to offset income from other states
- Owners can reduce employment taxes by taking distributions instead of salary
- No double taxation thread associated with C Corporations
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