What is an S-Corporation and when to use it for a business

What is an S-Corporation and when to use it for a business

On Behalf of | Jul 6, 2018 | Uncategorized |

There are many people who would like to be their own boss in Louisiana. In order to do this though, people generally have to start their own business and run it. This is not as simple as just doing some marketing, getting customers and earning money though. It is important that the people have the right business structure when they get started. If they do not, they could find themselves in legal issues later on that could have been avoided.

Many small businesses, especially when they are just starting up, do not have as many complications that are found in bigger businesses. They do not necessarily need to form a C-corporation that many bigger companies need to do. Small businesses can use what is called an S-corporation, which is designed to have some of the advantages of a corporation legally, but still have the advantages of partnerships for tax purposes.

S-corporations profits and income passes directly through to the shareholders of the company. This allows the company to avoid double taxation since it would not need to pay the corporate income tax that C-corporations need to pay. While receiving this tax advantage, the S-corporation still receives the liability protection of C-corporations. However, in order to qualify to file an S-corporation, certain criteria must be met. The company must have less than 35 shareholders and they all must be US citizens or residents, it must be a domestic company and there are other additional criteria.

There are many small businesses in Louisiana and many others who would like to start them. There are many business structures that these people can use when starting their businesses, one of which is an S-corporation. It is important to understand the advantages and disadvantages of each one so they select the best fit for their company. Experienced attorneys understand the various business structures and may be a useful resource.