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The pros and cons of an S corporation

Running a business in Kentucky means lots of decisions, from the design elements of a website to the exact marketing slogan and plan. Some of the most important decisions are the financial aspects of the business plan, and that includes whether or not to form an S corporation. There are several advantages and disadvantages to this type of classification.

According to the Internal Revenue Service, there are reasons why a business owner may choose not to file as an S corp. Regulations for this type of business are more strict than those the person may have been used to and include penalties like late filing fees for tax returns. There are also certain restrictions on the calendar year. To benefit from this type of classification, an applicant needs to be disciplined and prepared to follow all pertaining regulations.

According to the U.S. Small Business Administration, the advantages of having an S corporation include the business’s ability to have a separate life from its shareholders and the tax savings available since part of the income can have a lower tax rate. Additionally, some employee benefits can be treated as taxable income and expenses can be written off.

While some business owners choose to form a traditional C corporation, the benefits of allowing the company’s losses and gains to reflect on the owner’s tax return can make it a great choice for certain leaders. While there are several rules that need to be followed, including compensation and shareholder guidelines, there are also many financial benefits for the company.

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Gatlin Voelker,PLLC

Gatlin Voelker, PLLC
2500 Chamber Center Dr. Ste. 203
Fort Mitchell, KY 41017

Phone: 859-781-9100
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