Why You Should File Your Business As An S-Corporation
There are several reasons why you should file your business as an S-Corporation , but the most important reason is because you are only taxed ONCE because:
- There is no Self-Employment Tax on the profits and
- There is no corporate income tax at the federal level.
You simply pay personal income tax on the profits of the S-corporation.
With a C-Corporation, you must pay income tax on the profits of the corporation at the corporate level, and then again on your personal return when you pull the profits out as a dividend.
Yes, you can pay yourself a wage from the C-corporation to reduce the corporate profits, but then you have payroll taxes on those wages as well.
There are some circumstances at very high income levels where a C-corporation does make sense, but for the vast majority of entrepreneurs out there the S-corporation is the ideal entity structure.
It’s important to consult with a CPA before forming a business entity to determine the best corporate structure and tax consequences. If you would like to speak to one of the tax professionals at Potter & LaMarca, click here to make any appointment.