Is an S Corp the RIGHT move for your business—or a costly mistake?
💡 Thinking about forming an S Corp? You’re not alone! Many business owners switch to an S Corporation to save on self-employment taxes and protect their profits. But before you take the leap, it’s important to know both the advantages and disadvantages to make the right decision.
What is an S Corp?
An S Corporation is a tax election that allows business owners to avoid double taxation while benefiting from pass-through taxation. It’s a popular option for small businesses, but it comes with strict IRS requirements.
The Advantages of an S Corp
✅ Tax Savings: Avoid paying self-employment taxes on distributions 💰
✅ Limited Liability Protection: Separate your personal and business assets
✅ Pass-Through Taxation: No corporate taxes—profits go to shareholders
✅ Increased Credibility: Looks more professional than a sole proprietorship or LLC
The Disadvantages of an S Corp
❌ Strict IRS Rules: You must take a “reasonable salary” before distributions
❌ More Paperwork: Payroll, compliance, and meeting documentation are required
❌ Ownership Restrictions: No more than 100 shareholders, and all must be U.S. residents
❌ State-Level Taxes: Some states impose extra fees on S Corps
Who Should Consider an S Corp?
✔️ Business owners earning $50K+ in net income
✔️ Service-based businesses (consultants, real estate agents, freelancers)
✔️ Entrepreneurs looking to save on self-employment taxes
Who Shouldn’t Consider an S Corp?
❌ Side hustlers or small businesses making less than $40K in profit
❌ Startups needing outside investors (S Corps have strict shareholder limits)
❌ Business owners who don’t want extra compliance and payroll responsibilities
How to Set Up an S Corp
1️⃣ Start as an LLC or C Corp
2️⃣ File Form 2553 with the IRS
3️⃣ Set up payroll & accounting for compliance
4️⃣ Maintain corporate records & meetings
🚀 Is an S Corp the best move for your business? Let’s find out together! Watch my latest video here: https://youtu.be/4hhU8HGO_Yg
📞 Still have questions? Book a discovery call and let’s build a tax strategy that works for you! https://app.acuityscheduling.com/schedule.php?owner=14522012&appointmentType=62563958