What the Heck is an S Corporation?

Business owners may have heard the term “S Corporation” or be an S Corporation, but do not really understand what it means and how it affects their business.  So, what the heck is an s corp? A corporation or an LLC can elect to be treated as an S Corporation for federal tax purposes. By doing so, they can potentially save the business and its owner’s significant amounts of money in federal taxes.

Electing how to be taxed

In addition, if a corporation does not elect to be treated as an S Corporation, it will default to be taxed as a C Corporation. C Corporations experience “double taxation” and the income to the corporation is taxed twice. However, electing to be treated as an S Corporation, causes the income and losses to the corporation to be passed to the shareholders. Once that happens, the corporation is only taxed once. The same can be said for a LLC that doesn’t elect to be taxed as an S corporation. When that happens, the LLC will default to being taxed as a disregarded entity. With that, all of the income to the LLC will be taxed at the business owner’s (or owners’) personal tax rate including self-employment tax. If you’re already in the top tax bracket, that means you could be inching near a 50% tax rate. That’s a lot!

Here at 180 Law Co, we have your back!

In this episode of all All Up In Yo Business, find out what the heck is an S corp, how it’s taxed and how to become one.

Also, contact us today if you need help with figuring out what an S corp is. And be sure to subscribe to our YouTube channel for more All Up In Yo’ Business!

Want to learn more about S corps? Check out more info on them here.

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  1. Avoiding the Risks of a Single-Member LLC | Parker, Colorado Business Attorney Aiden H. Kramer | The Law Office of Aiden H. Kramer, LLC - […] to pay your mortgage, either. Make sure you pay yourself as an ownership withdrawal, or as a salary if…
  2. How Do I Pay Myself in a Single-Member LLC? | The Law Office of Aiden H. Kramer, LLC - […] If the LLC elects to be taxed as an S Corporation, on the other hand, you have to be…
  3. Top 10 Things Every Small Business Needs - […] 2553 (S Corp).  This is the IRS form that needs to be filed if you want your small business…
  4. LLC or S Corporation? - The Law Office of Aiden H. Kramer, LLC - […] are a lot of benefits to having your business be taxed as an S Corporation. While an S Corporation…
  5. Sole Proprietor vs LLC vs Corporation - […] You can also elect to have your business taxed as an S-Corporation.  An S-Corporation is not an entity itself;…
  6. How Do I Form An S Corporation? - The Law Office of Aiden H. Kramer, LLC - […] posted videos in the past discussing S Corporations and the benefits of forming an S Corporation, but this question still comes up:…
  7. How Do I Form An S Corp? - The Law Office of Aiden H. Kramer, LLC - […] posted videos in the past discussing S Corps and the benefits of forming an S Corp, but this question still comes up:…
  8. End of the Year Business Checklist - The Law Office of Aiden H. Kramer, LLC - […] an S Corporation. If your business is not already taxed as an S Corporation, now is a good time…

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