Qualified Assistance With S Corporation Formation
At Christopher J. Kane, PC, I guide Oregon’s business owners through the formation process. You have multiple options to choose from, and the selection process can seem daunting. I will explain your options and the benefits and potential downfalls of each.
We will work together to find the right plan that works with your desired business structure and goals. With over 23 years of experience, I have guided many businesses through S corporation formation and can help you successfully navigate the process.
Understanding How Taxation Impacts An S Corporation
S corporations themselves are not subject to federal income tax. Instead, shareholders are taxed on the S corporation’s profits. Furthermore, there is no dividend tax when the S corporation’s income is subsequently distributed to the shareholders.
The primary benefit of S corp. status is to avoid the double taxation that occurs with C corporations. The S corp. passes net income or net losses to its shareholders who, in turn, pay taxes on the income or obtain the benefit of the loss deduction
Distributions of cash by an S corporation to a shareholder are first applied against the shareholder’s tax basis in her shares and are taxable to the shareholder only to the extent they exceed the shareholder’s basis.
Distributions of property or complete liquidation of an S corporation will also result in only one layer of tax.
S Corporation Vs. Limited Liability Company Formation
There are benefits to forming your business as an S corporation. If you instead chose to establish your firm as a limited liability company (LLC), the LLC members would be subject to a self-employment tax of 15.3 percent if they:
- Have personal liability to debts of LLC
- Have authority to contract for the LLC
- Work for the LLC at least 5000 hours/year
S corp. shareholders are not subject to self-employment tax on their distributive shares of corporate earnings. They also receive the benefit of loss deduction, while LLC members cannot.
Contact An Experienced Attorney For Trusted Counsel
The formation decisions that you make will have long-term implications on your company’s structure and financial state. Call my Portland office at 971-808-4518 to schedule an initial consultation if you are starting a business. You can also contact me online.
You need a capable lawyer, and I can provide the trusted legal counsel you require to protect your company’s long-term stability.