Advantages and Considerations of an S-Corp
An S-corp may provide tax savings over other structures. However, it has restrictions such as being limited to U.S. citizens and resident aliens and having a cap on shareholders at 75.
Consider expected income and expenses. Compare possible tax savings to S-corp costs. For lower or uncertain income, an LLC may be a better option initially. If income grows high enough, an S-corp could offer more advantages.
Speak to an accountant to analyze specifics. If just starting out with uncertain income, wait on filing as an S-corp. Revisit when income increases.
Disadvantage of an S-Corp
What is the disadvantage of an S Corp?
Transitioning from Sole Proprietorship to S-Corp
When should you switch from sole proprietor to S Corp?
An S-corp may provide tax savings over other structures but has a limitation of 75 shareholders. Whether an S-corp makes sense depends on your situation.
Consider expected income and expenses. Compare possible tax savings to S-corp costs. For lower or uncertain income, an LLC may be a more suitable choice initially. If income grows high enough, an S-corp could provide more advantages.
Speak to an accountant. If starting out with uncertain income, wait on filing as an S-corp. Revisit when income increases.