Choosing the right business structure is critical for small business owners, as it influences funding options, employee compensation, and tax situations. A favorable option is to file as an S corp, which has significant tax benefits. It allows businesses to avoid double taxation by passing income directly to shareholders, making it essential to understand the requirements and steps to properly establish this structure.
An S corporation is characterized by its pass-through tax status, which means that corporate income, losses, deductions, and credits are passed on to shareholders—allowing them to report this on personal tax returns. This arrangement prevents double taxation, making S corps a popular choice for many small business owners seeking tax efficiency without sacrificing necessary corporate structure.
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