When you are in the process of forming your business, there are many important questions you need to consider with regard to the structure you will select for your new company. Many business owners make the mistake of assuming that planning for and structuring a new company will be too time-consuming or costly, but this is not true. Furthermore, there are many advantages associated with choosing a business formation structure that meets your needs and supports your goals.
One of the most important advantages of an S Corporation is the assets are protected. Other than situations where a shareholder personally signs for or makes an express personal guarantee, or where personal services are involved, shareholders are not generally personally responsible for business debt or corporation liability.
Another important advantage is that an S corporation does not have to pay federal taxes at the corporate level. Any loss or business income is passed through to the shareholders who report this information on their personal income tax returns. An S corporation can also provide your company with a straightforward ownership transfer. An S corporation can be owned by a single owner or by multiple owners, and it can pay salaries and make distributions to the owners. It is even possible for a Limited Liability Company (LLC) to elect to be taxed as a Subchapter S corporation
Finally, structuring your company as an S corporation also provides enhanced credibility for your business. This can help you establish a positive reputation with new customers.