No matter what type of business you have, partnership or sole proprietorship, there is the curiosity about what will happen if you incorporate your business to the S Corp. This is a corporation that is treated as the pass-through entity from the IRS (Internal Revenue Service) from an election. Why? This is because creating an S Corporation request to file an Article or Incorporation to the State Secretary or any government body level. It is ruled as corporation and will issue stock. It aims to protect shareholders personal assets for the corporation’s liabilities. However, it is essential that any form business entity should be familiarized by any business before incorporating your business. This post will educate you.
Know what its advantages are or what good it will bring to your business:
- Protection on assets. It aims to protect any personal assets of the shareholders. It is not the responsible of the shareholder to pay any liabilities or debts owned by the business. The creditors will not force the shareholders to pay her or his personal assets such as house, car, bank accounts or etc for the sake of the business.
- Straightforward ownership transfer. It is known that S Corp can transfer ownership without difficulty and having problems with the tax. It does not require the owner to make some adjustments on the property.
- Good credibility. It helps a new business to maximize its credibility that can be useful when it comes to applying bank loans.
Know what is not good about incorporating your business with S Corp:
- Filing fees. Before you can form or incorporate your business with S Corp, there are certain fees that you must pay. Although the fees are not that expensive but it sole proprietorship and partnerships are still cheaper.
- Less flexible. S Corp cannot allocate any loss and income to a shareholder because it has a one-class-of-stock restriction.
These are the few in many more advantages and disadvantages of S Corp. You have to research more in order to know better and compare it with Llcfl.