Corporations are legal entities established by charter with certain legal rights, powers, privileges, and liabilities. Corporations can be established in several formats but always become their own entity with independent legal rights and obligations. Corporations can be more difficult than other business options in that they have defined structures which you must maintain, however, they offer numerous advantages in terms of legal rights, taxation, and the ability to create stock.
An S-Corporation is not a business type but rather a tax-filing option. Filing as an S-Corporation means that any corporate income, losses, deductions, or credits are not taxed as corporate income but are instead passed through to shareholders, where they are reported as personal income. The largest advantage of the S-Corporation is that it allows small and medium businesses to avoid double taxation (corporate income and personal income) on corporate income.
- Owners can report profit and loss on individual tax returns to reduce taxation.
- Shareholders or owners reduce tax through employment tax savings and up to 20% of net business income.
Get an EIN Number for a S-Corporation
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