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What’s this I hear about S-Corps?

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! 

-Amber :)