My golf buddy told me that there are advantages from electing to be taxable as “S corporation.” What is an “S corporation” and why would I want to operate my business as one?
At the present time, nearly all new small businesses that adopt a formal structure are organized as either a limited liability company (“LLC”) or as an S corporation. This is because the other forms of doing business (e.g. a sole proprietorship, general partnership or limited partnership (with respect to the general partner) require “someone” to be liable for the debts and obligations of the entity. By comparison, with a LLC or corporation, the members (in the case of a LLC) or shareholders (in the case of a corporation) are liable only to the extent of their investment in the company. Although a C corporation offers limited liability, the current income tax treatment of C corporations generally makes them unsuitable for use by start-up businesses, except for certain service businesses. The tax treatment for LLCs and S corporations provides for “pass-through” treatment of tax items, which generally benefits owners of businesses that may incur losses in the start-up years. There are cer
