S Corporation Pros vs Cons

The Advantages vs. Disadvantages

of the S Corporation Entity

First let’s define what an S Corporation is.  After forming a corporation or an LLC, an election is made to be taxed as an S corporation.  The S Corporation is a pass-through entity in which the corporation’s income, deductions, and tax credit items are passed through to Individuals to report on their tax returns.

The Advantages of an S Corporation are:

  1. Save on Payroll Taxes
  2. Split Taxable Income
  3. No Double Taxation


The Disadvantages of an S Corporation from a Sole Proprietorship are:

  1. Extra Tax Return and Legal Fees
  2. Possible Extra State Income, Franchise or Similar Taxes
  3. Extra Paperwork
  4. Trapped Assets
  5. Value in Case of Death
  6. Medical Mistreatment
  7. No Medical for Spouse without Payroll Taxes
  8. Payroll Taxes on Hiring Your Children
  9. Impact on Retirement Contributions

If you would like to go into more detail concerning S Corporations, please call Susan at 630.523.5762. For more great tips on becoming a highly profitable business owner, check out Highpoint Advisory Services.



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