|The deadline to elect S-Corporation status from the federal government is
March 16, 2009. Now is the time to consider whether your corporation or LLC should make this tax election. What is an S-Corporation? What are the benefits?
An S-Corporation starts out as a C-corporation or LLC. Choosing S-Corporation taxation avoids traditional “double-taxation” for corporations by allowing profits to “pass-through” and be reported on shareholder’s individual tax returns. LLCs can benefit from being taxed as an S-Corporation by reducing self-employment taxes on salaries paid to the owner(s).Self-employment tax savings
In an S-Corporation, only earnings paid to an owner as salary is subject to payroll taxes. Any money left in the business for reinvestment or distributed to the shareholder as a dividendis not subject to self-employment tax.