Top 7 Advantages of S Corporations
Once you start a business, you’ll want to incorporate it for business or legal reasons. But, before you do, you should know about a business structure that can give you significant benefits: S corporations. When you incorporate your business as an S corporation, you can bypass the double taxation commonly linked with corporate companies. Not to mention, you could save enough on self-employment taxes to equal out the additional cost of incorporating, plus have leftover funds to invest in other areas of your company.
This may be the right business move for you and your company, and specialists who offer S Corp formation services will go over the key benefits that this type of corporation has compared to other businesses. Read on!
Why should I choose an S Corporation?
There are several advantages to incorporating any type of company, but S corps provide certain beneficial benefits that other structures do not. Here are seven essential advantages of becoming an S corporation:
1. Tax advantages
One of the most significant advantages of an S corp is that it can save you money on taxes. With an S corp, your business income is only taxed once at the personal level, rather than being taxed twice (once at the corporate level and again at the shareholder level). This can lead to a significant reduction in your overall tax burden.
S corps offer greater flexibility when it comes to how you structure your business. For example, with an S corp, you can choose to have different classes of shares, which can give you more control over who owns what percentage of the company. You also have more flexibility when it comes to distributing profits and losses among shareholders.
3. Limited liability
Like other types of corporations, S corps offer limited liability protection to their shareholders. This means that shareholders are not personally liable for the debts and liabilities of the corporation. This can give you peace of mind knowing that your personal assets are protected in the event that your business is sued or faces financial difficulties.
4. Increased credibility
When you form an S corp, you may find it easier to attract investors and partners. This is because S corps have certain tax advantages and are seen as being more sophisticated than other types of businesses.
5. Built-in succession planning
Another significant advantage of S corps is that they offer built-in succession planning. This can be a big help if you want to ensure that your business will continue to run smoothly if you decide to retire or leave the company.
6. Reduced self-employment taxes
S corps can help reduce your self-employment taxes. For example, if you are a sole proprietor or LLC member, you are required to pay self-employment taxes on your business profits. However, if you form an S corp, you can pay yourself a reasonable salary and only be required to pay self-employment taxes on that salary. This can lead to significant tax savings for business owners.
7. Health insurance tax savings and retirement saving plans
S corps provide the ability to save money on your health insurance premiums. If you’re self-employed, you can deduct the cost of your health insurance premiums from your taxes. This can save you a lot of money come tax time. S corps also offer the ability to set up retirement savings plans for yourself and your employees. This can help you save for retirement and get a tax break at the same time.
Who provides trustworthy S Corp formation services?
If you’re interested in forming an S corp for your small business in California, David York’s Tax Service are your go-to experts. We will do whatever it takes to make the process as seamless, speedy, and effortless as possible. We’ll walk you through the essential details regarding S Corps and why it makes sense for your type of business. Schedule your consultation with our experts in San Diego today!