S-Corps are small business corporations and aren’t required to pay income tax. This allows companies to divide their income and losses among their shareholders, who are then responsible for reporting these through their individual income tax returns.
But an S-Corp is also subject to specific rules and regulations. So is this option right for your company? Reach out to the lawyers at The Curry Law Firm to learn more about your options. We can guide you through the process and paperwork to make your business the best it can be.
Many business owners consider S-Corp status advantageous in terms of the level of liability offered and the tax savings they allow. S-Corps have an edge in ownership transfer and business growth compared to sole proprietors.
S-Corporations operate by sharing their income, deductions, and tax credits with shareholders annually, regardless of distributions. Income is thus taxed at the shareholder level, an advantage over many other business structures. Distributions to shareholders are tax-free and don’t represent a financial loss for the company.
S-Corporations also allow a company to take advantage of lower self-employment taxes. Any taxable income is split between salary and distribution, with only the salary component remaining taxable, reducing the company’s overall tax liability. Typical S-Corps classify 60 percent of their income as salary.
The distribution component isn’t taxed, but S-Corps must carefully divide their salary and distribution. Any unreasonable division could be construed as tax evasion. To avoid any undue stress, you may need to contact a business lawyer for help.
Determining whether your business could qualify as an S-Corp could significantly reduce your tax liability and may be worth investigating. But you may be concerned about meeting the qualifications for an S-Corp.
According to the Internal Revenue Service (IRS), your corporation must meet a series of requirements, the first being that you have one hundred or fewer shareholders. All shareholders must not represent other corporations, partnerships, or non-resident alien shareholders.
Your company must also only offer one class of stock.
Once you meet these requirements, you and your lawyer can discuss pursuing this change. Structuring your business as an S-Corp gives it a sense of credibility with potential vendors, partners, and customers. Discussing how restructuring may benefit your company with an experienced law firm can be a great step towards securing a future for your company.
If you’d like to discuss how structuring your business as an S-Corp could benefit your company, contact our team at The Curry Law Firm. We have extensive experience in helping businesses reduce their risk and increase their profits.
We’re happy to offer you all the guidance you need to increase your profitability and move up in the world of business. You can reach us for a consultation by calling 713-678-0013 or leaving us a message via the contact form on our website. Don’t delay—we’re here to help.
