An S-corporation enjoys a limited liability similar to that of a C-corporation but is a pass-through entity for tax purposes. This means that the business profits and losses pass through to the owner's personal tax returns. Unlike a C-corporation, there is not corporate-level taxation for an S-corp. S-corporations report their income and expenses on Form 1120-S.    

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Advantages of an S-Corporation​

• Owners do not have personal liability for the business debts and liabilities.  

• There is no tax on the corporate level and no risk of double taxation. The S-corp is a pass-through entity so the government taxes it much like a sole proprietorship or partnership.  

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Disadvantages of a S-Corporation​

•  Like C-corporations, S-corps are more costly to start than a sole proprietorship or partnership.  

• As with a C-corporation, the owners still need to comply with corporate formalities such as holding board and shareholder meetings. 

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S-corporations can be a good choice for a business that wants a corporate structure but that will maintain the tax flexibility as you would find with a sole proprietorship or partnership.  In order to organize or convert your business to an S-corp, you must file the IRS form 2553 to complete that election. Pryor Services can help you make the election when you are ready.