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Pros And Cons Of A S Corporation

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An S corporation is a hybrid corporation that is organized as any regular corporation under state laws, but is treated, for federal tax purposes, as a pass-through entity. S corporations are restricted to no more than 100 shareholders which limits growth.
S corporations enjoy pass-through taxation. The corporation’s income is taxed when it is paid in dividends to its owners under the personal income tax, not at the corporate level. This means that both the income and tax loss of the corporation can be “passed through” to the corporation’s owners.
S corporations don't have the luxury of unlimited growth like C corporations as they're restricted to no more than 100 shareholders. Also, S corporations cannot be owned by a C corporation, other S corporations, LLCs, partnerships, or many trusts. Shareholders have to be natural persons – exceptions to this rule include certain trusts, estates, and tax-exempt nonprofit organizations. In addition, shareholders of an S corporation have to be US citizens or US residents for federal tax purposes …show more content…

If the S corporation fails to meet its financial obligations, non one person or group is responsible to creditors. Creditors cannot go after the personal financial assets of any director, officer, shareholder, board member or employee. If the C corporation is sued, shareholders are only liable to the extent of their investments in the corporation.
S corporations enjoy pass-through taxation. The corporation’s income is taxed when it is paid in dividends to its owners under the personal income tax, not at the corporate level. This means that both the income and tax loss of the corporation can be “passed through” to the corporation’s owners. In addition, the S corporation enjoys a once-a-year tax filing requirement, in contrast to the quarterly tax filing requirement for a C

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