Legal Forms of Ownerships for Small Businesses

As part of our legal forms of ownership for small businesses discussion, we recently discussed an overview of C corporations. Today, we are continuing this discussion with an overview of S corporations.

An S-corp is a tax designation available to certain business entities, such as LLCs and corporations. S-corps are defined by their pass-through tax structure.

Like all business entities, S-corps possess certain advantages and disadvantages. A few of these pros and cons are as follows:

Pros

1. Business losses can generally be passed through to the owners.

2. Taxes only need to be filed once a year.

3. Directors, officers, and shareholders enjoy limited liability.

Cons

1. Limited to one class of stock.

2. More IRS oversight.

3. Limited to no more than 100 shareholders.

4. Restrictive shareholder requirements.

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*This blog post should not be construed as legal advice on any specific facts or circumstances. The contents are intended for general information purposes only.