Business Management With An S-Corporation

An S-Corporation is basically the same as a C-Corporation except for tax benefits. They are taxed similar to a partnership. In a S-Corporation the income is taxed once, unlike a C-Corporation that is taxed twice. Some of the rules of an S-Corporation are that no more than 75 shareholders, the shareholders have to all agree to the corporation being an S-Corporation, all must be legal citizens of the United States, and stock can be of only one class.

Information on S-Corporations

In an S-Corporation the shareholders are not liable personally for any of the corporations debts or damages. Since it is a non taxable entity the profits get taxed once then are passed down to the shareholders. On their personal income taxes the shareholders have to put any losses or profits from the corporation. The S-Corporation can't get the dividends received deduction and the 10% taxable income limitation for charitable deductions does not apply to them.

The shareholders of an S-Corporation control it. They are not allowed to be other corporations or partnerships. When the corporation gets bigger they will eventually become C-Corporations because of all the regulations and rules of an S-Corporation.

Until that time or the corporation is dissolved the S-Corporation will always exist. The corporation will be there even if the shareholders change. The S-Corporation automatically will be considered a C-Corporation if all the rules and regulations no longer exist for an S-Corporation.

The Convenience of S-Corporations

You can have an S-Corporation in any state. The rules are different in some states, which also means the taxation might be also. Be sure to check with the rules in the state where you wish to form the corporation and be sure to follow them.

When dealing with finance and business matters you should always talk to a professional that can answer any questions you might have. The S-Corporation can be a great opportunity for somebody that wants to change the business model they are in and not get the additional liability. The convenience comes in with the shareholders getting the tax benefits and the corporation gets the liability.

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