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Home Q&A Forum What is an S corp?

Incorporation

S Corp

California

Asked on Jun 3, 2023

What is an S corp?

I am considering starting a business and I have heard about the different types of business entities. One of them is an S corp and I am interested in learning more about it. I am looking for information on what an S corp is, what its advantages and disadvantages are, and whether it is the right type of business entity for my situation. I am hoping to get more information from a lawyer to help me make an informed decision.

1 Attorney answer

Answer

Incorporation

California

Answered 393 days ago

Paul S.

ContractsCounsel verified

Business Lawyer
Licensed in California, Ohio
Free Consultation

An S-corp isn't actually a type of business. Rather, it's a tax election that you make with the IRS, after forming either a C-corporation or an LLC. When you form a C-corporation and then make an S-corp tax election, you will be taxed like a partnership (if there are more than one shareholder) or sole proprietorship (if only you). If you form an LLC (which is already taxed like a partnership or sole proprietorship) and make an S-corp election, you can lower your self-employment taxes. Keep in mind, also, that there are restrictions on the number and kind of shareholders in an S-corp.

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