Search Help


Enter one of more keywords to search. Use quotes for “exact phrase.” Note that '*' and '?' wildcards are supported.

When your search results appear, you can refine your search further: Sort for only results in which all search terms appear AND/OR sort by chronological order.

Article Date:
March 2008


Word Count:
2666

 

 

Is Your S Corporation Adding to Your Bottom-Line Profits?


The major tax benefit to operating your business as an S corporation is the possible savings on self-employment taxes. This article examines the tax savings to see if this form of business is right for you as a single-owner or husband-and-wife-owned business.

 

You may not need an S corporation if liability protection is your only concern. You can achieve both liability protection and proprietorship status with a single-member limited liability company (LLC). In community property states, a husband and wife can elect single-member LLC status on their federal tax return and thus file a proprietorship return in either the husband’s or the wife’s name.1

 

This article focuses on the self-employment tax savings of the S corporation compared to those of the proprietorship. It also discusses the tax and record-keeping costs of these two forms of business.

 

You want to read this article if

 

·

you are considering an S corporation as your form of business, or

·

you are wondering whether your current S corporation is the best form of business for you.

 

Taking Cash from the S Corporation

 

As the business owner, you take cash from your S corporation in four ways:

 

1.

W-2 income

2.

Rent paid by the S corporation to you for its use of assets that you own and rent to the S corporation

3.

Corporate reimbursements to you for your employee expenses

4.

Distributions from the earnings and profits of the S corporation

 

The S corporation is a pass-through entity. This means that the income and losses pass through to the shareholders and are taxed on the shareholders’ returns.

 

For tax purposes, think of your S corporation as a funnel into which you put ... Log in to view full article.

Log in to view full article
Already a subscriber?
 
Email Address

 
Password

Log In Send me my password

You'll be able to read the full article and get instant access to the last few issues of the Tax Reduction Letter

Not yet a subscriber?
 
with a money-back guarantee



 

SS