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The Benefits of Being an S Corporation

August 16, 2018
Taxes

When starting a business or changing your existing business from a sole proprietor to a general partnership, there are some questions you need to consider for tax purposes. An S Corporation is one of the three popular choices for those wanting to start a business. As a business owner, you can select how you want to be taxed. Being an S Corporation can affect how much you pay in taxes, how you handle profits and how you distribute shares. There are benefits to every entity type, and it's important to have small business tax software that you trust.

What is an S Corporation?

An S corporation is a type of tax classification, also called Subchapter S election. This is a type of request you make to the IRS to change the method of how you are taxed as a corporation or a limited liability company. The primary reason a business owner elects to have his or her corporation taxed as an S Corporation is to save money on taxes. 

Advantages of S Corporations:

·      Protected assets. An S corporation protects the personal assets of its shareholders. A shareholder is not personally responsible for the business debts and liabilities of the corporation. Creditors cannot pursue the personal assets of the shareholders to pay business debts. At Halon Tax, we ensure that our small business tax software defends your S corporation.

·      Profits are distributed to the shareholders. S corporation shareholders can be employees of the business and draw salaries as employees. They can also receive dividends from the corporation, as well as other distributions that are tax-free to the extent of their investment in the corporation.

·      Limited liability for management and shareholders.

·      Unlimited number of management. An S corporation does not need to make adjustments to property basis or comply with complicated accounting rules when an ownership interest is transferred.

·      Profound Credibility. Operating as an S corporation helps a new business establish credibility with customers, employees, vendors and the business world in general. This step shows commitment to your business.

S Corporations are for businesses that provide a service, such as consulting. The work for businesses that will not have significant start-up costs, will not need significant equipment, or will not make a tremendous amount of money without a lot of effort and expense. However, not every business can qualify for S Corporation status. Shareholders of an S Corporation must be U.S. citizens, and the corporation cannot have more than 100 shareholders.

If your small business meets three simple tests, then Halon small business tax software is for you. If your business has less than $500,000 of revenue and assets, less than five owners, and files just one state tax return, visit us online today.

Christopher Ragain, CPA

Christopher Ragain, CPA is the founder of Halon Tax and one of the industries top authorities on micro-business taxation and tax planning.

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