S Corp Taxes
Electing to be taxed as an S corp can be a great choice for many entrepreneurs. S corps provide their owners (shareholders) with the best features of LLCs and C corps. Like LLCs, S corp shareholders are taxed on business income at the personal level. Like C corps, S corp shareholders can be considered employees, not subject to self employment tax. In combination, these features mean that pass through business income is exempt from self employment tax. Further, since income is pass through, amounts distributed to an S corp shareholder in excess of salary payments can be tax free, whereas in a C corp such payments would be taxed as dividends. Overall, compared to the other organizational structures S corps are extremely versatile and can be a great entity choice for entrepreneurs.