All small businesses have tax preparation, especially those with a S-Corporation. When running a business, one of the most challenging concepts that you are going to need to deal with is the issue of taxation. Dealing with your taxes can be a hugely difficult concept, not because you can’t afford them but because of all the permutations that can make taxation different to manage. One of the big factors that can throw a lot of people comes down to the way that they have their business structured. Your business will likely have a form of formation or corporation, and that determines how your taxation is going to be managed. One common form of business model, of course, is an S-Corporation.
For anyone who has set up in this form, we have some good news for you. S-Corporations have access to some pretty nifty tax benefits that other forms of corporation simply do not get. With that in mind, let’s take a look at what you can benefit from when being part of this form of company. Why can doing this make it easier for you to have a simpler time of it when the taxman comes calling?
S-Corporation Taxes
For one, an S-Corporation is paying nothing towards federal taxes at a corporate level. This is obviously a very nice break, utterly removing one of the more expensive and challenging forms of tax for many business owners. As such, this can be very useful for making sure that you keep your finances a little rosier than they were beforehand.
Of course, this happens because your business looks at any income or losses as being “passed through” off to the shareholders of the company. Any shareholders who report the income on their personal tax return is contributing to this lack of having to pay tax at this level.
For new start-ups, this can be a vital part of making your earliest days as a business fun and affordable.
Income
Another lovely benefit of being in an S-Corporation is that it allows employees of the business to also be shareholders. This means that shareholders can draw a living through the businesses income, and make a salary. With the addition of dividends from the company, and other tax-free distributions, this is quite a nifty model to work from.
However, as ever, you shouldn’t look to try and make the most of any tax benefits without professional assistance. With so many potential deductions, you should speak with a CPA!
