Business Moves: 9 Tax Benefits of S Corp Status
Navigating the wide world of taxes and corporation statuses is a fast way towards headaches. There is a lot to take in and for the many that don’t have the proper accounting understanding, it seems impossible to sort through.
Figuring out whether you should file for S Corp status can be a major factor in your business. So, we cut out the hard stuff and bring you the major benefits of S Corp status.
Here are the top 9 tax benefits of S Corp status.
1. Limited Liability
Managing customer’s troubles is a big part of business. You can’t protect against everything.
For when a lawsuit comes your way, limited liability can be a godsend. If your company cannot pay damages to a lawsuit, without limited liability, the courts then go for your personal assets. S Corp status protects you.
2. Unlimited Management
S Corp status allows for a wide berth of potential management positions and styles. This allows you to determine the best management ability of your business.
3. Personal Tax Benefits
The biggest tax benefit of S Corp status is passing on corporate tax benefits on your personal taxes.
You can now file for business income, tax deductions, and many credits onto your personal taxes with an S Corp status.
4. Salary and Dividend Payments
As an S Corp, all shareholders can gain the double benefit of salary and dividend payments.
As an employee, they can collect a salary paycheck taking from the company’s expenses. The dividend payment gives them an extra bonus based on the company’s success.
5. Powerful Income Splitting Potential for Owners
The choice of income taken from the company itself does not need to be a universal decision. So, if one shareholder prefers to not take in both employee income and dividend payments, they do not lock other shareholders into the choice.
6. Strong Privacy Protection
Privacy can be a great boon for a major business owner. S Corp status protects you from your identity and your company tying together. This can help you divest your private assets from the company itself.
Some states even go above and beyond this provision, adding additional privacy measures.
7. Easy Transfer of Ownership
When a CEO or other high ranking shareholder wishes to move on, either for personal reasons or business ones, there can be a lot of paperwork and other issues involved.
S Corp status helps to cut through this red tape and makes the transfer of ownership easier.
8. Avoid High-End Accounting
The accrual method of accounting is a common requirement for major corporations.
If you apply for S Corp status or make less than $5 million a year, you can be exempt from this accounting requirement.
9. Establishes Credibility
Gaining an S Corp status can give a major foundation of credibility for your customers. S Corp status helps to show that you have made strides to establish yourself.
S Corp can show that you have gone above and beyond your usual business standards.
Filing for S Corp Status
Now that you’ve had time to get a firm grasp on what S Corp status may mean for you, you need to know where to go to file for this status.
Paperwork can be daunting. Lucky for you, there are guides available for the filing status. To begin, go over the details here on how you should file for S Corp status.
Enjoying the Benefits of S Corp Status
Managing a business is never as straight forward as you may want. Reaping the benefits of S Corp status is only a small piece of the business success puzzle.
For all your future guides on turning your small business into a success powerhouse, we here at Small Bizsense are eager to help. Check out our other guides today.