An “S” Corporation, like a “C” Corporation, protects your personal assets from company liabilities because the owners, called shareholders, are not personally liable for the debts and obligations of the business. It is initially formed as a C-Corporation by filing the articles of incorporation with the state, and becomes an S-Corporation when an extra step is taken by filing with the IRS. The primary benefit of an S-Corporation is that it allows the shareholders to receive profits free of taxation at the corporate level. The profits will only be taxed at the individual level, thereby avoiding the “double tax” that C-Corporation shareholders are subject to. (C-Corporations are taxed at the corporate and individual level). Advantages: Ownership can be easily transferred by selling stock in the corporation, owners working in the business are employees and are therefore eligible for certain fringe benefits such as group insurance plans, retirement and profit sharing plans, and tax-favored stock option and bonus plans.
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