My accountant is suggesting an “S-corp” for the restaurant my wife and I want to start. Is that a good idea?
It could be. An “S” corporation is also known as a “Sub-Chapter S” corporation. The “S” corporation format makes good sense for many hospitality businesses, such as family-owned operations. The requirements for establishing and maintaining an “S” corporation status include: 1. A limit of no more than 35 shareholders; 2. The issuance of only one class of stock; 3. A requirement that all shareholders are U.S. citizens; 4. All shareholders must be individuals, rather than corporations; and 5. The “S” corporation operates on a calendar year financial basis. In an “S” corporation, any profits from the business are distributed directly to the shareholders in proportion to their ownership of the corporation. The profits are reported on the individual owners’ tax returns and are taxed at the individuals’ taxable rates, which is similar to the favorable taxation treatment of a partnership. Remember that liability limitation is just as important an issue as taxation, however, so be sure to consi
