One of the most asked questions in my DMs and during my AMAs is about S-Corporations (S-Corp). Soooo many people think that a S-Corp is their business entity when actually a S-Corp is a tax election status a business can make that allows you to pass through your company’s earnings onto your personal tax return.
The big benefit of a S-Corp election is that it may help some corporations because it allows them to avoid a type of “double taxation.” Namely, the S-Corp status allows the corporation’s profits and losses to flow through to shareholders’ personal tax returns–the corporation itself does not pay income taxes.
In order to designate your Corporation as an S-Corp you simply fill out an IRS Form 2553 and send it back to them. And, boom! You’re done!
S-Corp status is not for everyone and does have some drawbacks. S-Corps have some restrictions on ownership and cannot have more than 100 shareholders among other things.
Keep in mind that you should ALWAYS consult with a tax professional before electing for your business to have S-Corp status!