Sub Chapter S
A Subchapter S Corporation is a form of corporation that meets the IRS requirements to be taxed under Subchapter S of the Internal Revenue Code. The S corporation is more appealing to small-business owners than a standard corporation. That 's because an S corporation has certain tax benefits and provides business owners with the liability protection of a corporation. S corporations require scheduled director and shareholder meetings, minutes from those meetings, adoption and updates to by-laws, stock transfers and records maintenance.
A nice advantage to owning a S corporation is that it is limited liability which means that the owner/owners of the company aren’t liable for debt of the company. Let’s say someone were to injure themselves in your store and they decided to sue; the owner wouldn’t have to pay the defendant money from his/her personal bank account. Another advantage to owning a S corporation is its unlimited lifespan. That means that if you own a share of the corporation, when you die the share will be passed down to your heir/heiress but the business day-to-day will not be affected. The main advantage of owning an S corporation is the tax benefits.
A disadvantage of owning a S corporation is that it can only have 75 specific stockholders. An S corporation must follow the same formalities as a regular corporations. Certain fringe benefits are not available to it like this year you can only deduct 60% of health insurance with an S corporation; Regular corporations can deduct 100% of the premium. Regular corporations can deduct all of their disability insurance premiums; a S corporation can’t. Banks may charge more for checking acc...
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...ns that could expose you to greater liability.
A sole proprietor is someone who owns an unincorporated business by himself or herself. A sole proprietorship is the easiest corporation/company to start up because there’s no specific set of business rules, as long as you are the only owner. But like any other business you need to have your permits and licences. Because you and your business technically the same, the business itself is not taxed separately; the companies income is your income.
Some advantages to choosing a sole proprietorship are that it’s easy and inexpensive to form, you will have complete control, and it has easy tax preparation. The reason a sole proprietorship is easy and inexpensive is because costs are minimal. The most expensive thing about a sole proprietorship is getting you permits and license and other legal junk.
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