David M Daggett CPA has helped many companies and corporations with
their tax needs. An S Corporation is a corporation that is treated as a
pass-through entity by the IRS. A corporation can become an S
corporation by filing Articles of Incorporation with the Secretary of
State or similar government body. There are advantages and disadvantages
of becoming an S Corporation.
Advantages
Shareholder Assets
Those who hold shares in a corporation have their assets protected if it becomes an S Corporation. The shareholder does not become personally responsible for the corporation or any owed taxes.
Tax Filings
S Corporations are not required to pay a corporate tax. The business losses are passed through to each individual shareholder who will then claim the loss on their own tax returns. This can also offset other income on the shareholder’s tax return.
Disadvantages
Fees
There are fees associated with becoming an S Corporation. When the Articles of Incorporation are submitted, you will be required to pay the fees. The good news is these fees can be deducted as a business expense later.
IRS
The IRS tends to keep a close eye on S Corporations to make sure everything is being filed correctly and done legally. If you are doing everything correctly this won’t be a problem, but some people do not like the idea of a government agency following their finances so closely.
David M Daggett CPA helped many companies with their taxes and has helped some become an S Corporation for tax purposes. If you are considering becoming an S Corporation, consider both advantages and disadvantages of doing so.
Advantages
Shareholder Assets
Those who hold shares in a corporation have their assets protected if it becomes an S Corporation. The shareholder does not become personally responsible for the corporation or any owed taxes.
Tax Filings
S Corporations are not required to pay a corporate tax. The business losses are passed through to each individual shareholder who will then claim the loss on their own tax returns. This can also offset other income on the shareholder’s tax return.
Disadvantages
Fees
There are fees associated with becoming an S Corporation. When the Articles of Incorporation are submitted, you will be required to pay the fees. The good news is these fees can be deducted as a business expense later.
IRS
The IRS tends to keep a close eye on S Corporations to make sure everything is being filed correctly and done legally. If you are doing everything correctly this won’t be a problem, but some people do not like the idea of a government agency following their finances so closely.
David M Daggett CPA helped many companies with their taxes and has helped some become an S Corporation for tax purposes. If you are considering becoming an S Corporation, consider both advantages and disadvantages of doing so.
