Owning an S corporation can be a great way to get into business. As the owner of an S corp, you’ll have the flexibility and limited liability that comes with incorporating your business without having to pay corporate tax rates. In addition, you’ll have access to some additional benefits associated with being an S corporation owner.
This article will discuss the various perks of becoming an S Corporation owner so that you can decide whether to form an S Corp in California. Read on!
What are the perks of being an S Corp owner?
As an S Corporation owner, you have access to a variety of tax and financial benefits that make running your business easier. Here are the seven key perks of operating as an S Corporation.
1. Limited liability protection
By forming an S Corp, your personal assets are separated from those of the company, giving you greater protection from legal action or debt incurred by the business. Without this liability protection, owners may personally be held responsible for losses or obligations incurred by the company.
2. Tax deductions
With an S Corp, you can take advantage of certain tax deductions that may not be available to other types of business structures. For instance, an S Corp owner can deduct health insurance premiums and long-term disability payments for themselves and their employees from corporate taxes. Additionally, owners of S Corps are allowed to deduct medical expenses associated with running the business as well as travel expenses related to the company’s operations.
3. Lower self-employment taxes
By forming an S Corporation, you can avoid paying self-employment taxes on your income earned through the business. This is because profits are considered dividends, which is taxed at a lower rate than regular income.
4. Flexibility in distributing profits
As an S Corporation owner, you have the flexibility to pay yourself a salary from your business profits and then distribute the remaining profits to shareholders as dividends. This allows for greater control over how much money is taken out of the company each year.
5. Access to retirement savings plan contributions
An S Corp may be eligible for certain retirement savings plan contributions that are not available to other types of business structures. Contributions made towards these plans can help reduce taxable income for both the business and individual owners.
6. S Corp health insurance
An S Corporation is eligible for special health insurance plans that can provide employees with greater coverage at lower premiums. Additionally, owners may be able to deduct all or part of the premium cost from their annual taxes.
As an S Corps owner, you can set up a plan that reimburses employees for certain business-related expenses. This plan allows employers to provide their employees with reimbursements without having to report them as income or pay payroll taxes on the money.
Becoming an S Corp owner can provide many unique benefits that are not available to other types of business structures. From limited liability protection and tax deductions to retirement savings plan contributions and access to special health insurance plans, these perks make owning an S corp a great way to get into business. If you’re looking for more control over your income and additional ways to save on taxes, then forming an S corporation could be a wise decision for you.
Who can I trust to help me form an S Corp in California?
Here at David York Tax Service, we can help you understand the legal requirements associated with being an S Corp. Our team will provide guidance on the differences between S Corps and C Corps, as well as determine the owner’s compensation, advise on tax deductions and credits available to businesses of this type, and offer assistance with filing taxes.