Happy S Corp Filing Deadline Day!

Did you know there's another tax deadline that comes a month earlier than April 15th? That's right, we're talking about the S Corp filing deadline. The deadline to file (or file an extension) for S Corp's is March 15th, a whole month before the regular filing deadline. Even though the deadline is earlier, there are several advantages to electing to file as an S Corporation. Let's explore those: 

Pass-Through Taxation:

One of the primary advantages of S Corporations is the pass-through taxation structure. Unlike C Corporations, S Corporations do not pay federal income taxes themselves. Instead, business income, deductions, and credits flow through to the shareholders' personal tax returns. This can lead to significant tax savings, as the business avoids the double taxation that C Corporations face – once at the corporate level and again at the individual shareholder level.

Avoidance of Self-Employment Taxes:

S Corporation shareholders who actively participate in the business can receive a portion of their income as a salary and the remainder as a distribution. The portion received as a distribution is not subject to self-employment taxes, which can result in substantial savings. In contrast, sole proprietors and partners in partnerships must pay self-employment taxes on the entirety of their business income.

Flexibility in Distributions:

S Corporations provide flexibility in distributing profits to shareholders. Unlike other business structures, where distributions must be made in proportion to ownership percentages, S Corporations allow for more customized distributions. This can be particularly advantageous in managing tax liabilities for individual shareholders.

Reduced Risk of IRS Audits:

S Corporations typically face a lower risk of IRS audits compared to sole proprietorships and partnerships. The IRS scrutinizes these entities less frequently, giving business owners peace of mind and allowing them to focus on growing their businesses rather than navigating potential tax issues.

Enhanced Credibility:

Electing to file as an S Corporation may enhance the credibility of your business. Many stakeholders, including investors and lenders, view S Corporations more favorably than sole proprietorships or partnerships. This increased credibility can facilitate access to capital and foster business relationships.

Estate Planning Benefits:

S Corporations offer estate planning advantages, allowing for seamless transitions in the event of the owner's death. Shares in an S Corporation can be easily transferred or inherited without triggering adverse tax consequences.

Choosing to file as an S Corporation can offer a myriad of benefits, from tax savings to increased flexibility and credibility. However, it's crucial to consult with your tax professionals to determine whether this structure aligns with your business goals and circumstances.