Texas businesses that are just getting started have a lot of choices to make. One of the most important is what entity they will establish their business underneath and whether they decide to use an S corp filing. Most people are not familiar with the S corp filing, but it can be a great way to help save your business some money.
Understanding an S corp
A business formation lawyer may assist you with understanding all the aspects included in an S corporation. In a simple sense, an S corporation is a tax filing designation for your business. For example, a business may be set up as an LLC but opt to file taxes under an S corp structure instead of the LLC. There are many different reasons that a business owner may opt to be designated as an S corp for tax filings.
What are the benefits of an S corp?
The first major benefit of an S corp is tax savings. In traditional corporations, double taxation occurs. This means that both the business and the shareholders pay taxes on the revenue they gained throughout the year. In an S corporation, all the revenue is recorded on each individual shareholder’s tax return. This way, taxes are only paid once.
Another major benefit of filing as an S corp is asset protection. Those who establish a business as an S corp provide all the owners or members with limited liability protection. This simply means that the owner’s personal assets are completely shielded from any claims from business creditors.
If you’re in the stages of setting up a new business, there are many different entities that you can choose from. One key factor you want to consider is establishing an S corp tax filing status. If you’re unsure how to do this, it’s advisable to speak to an attorney.