What’s this I hear about S-Corps?
One of the most asked questions in my DMs and during my AMAs is about S-Corporations (S-Corp). Soooo many people think that a S-Corp is their business entity when actually a S-Corp is a tax election status a business can make that allows you to pass through your company’s earnings onto your personal tax return.
The big benefit of a S-Corp election is that it may help some corporations because it allows them to avoid a type of “double taxation.” Namely, the S-Corp status allows the corporation’s profits and losses to flow through to shareholders’ personal tax returns--the corporation itself does not pay income taxes.
In order to designate your Corporation as an S-Corp you simply fill out an IRS Form 2553 and send it back to them. And, boom! You’re done!
S-Corp status is not for everyone and does have some drawbacks. S-Corps have some restrictions on ownership and cannot have more than 100 shareholders among other things.
Keep in mind that you should ALWAYS consult with a tax professional before electing for your business to have S-Corp status!