Accounting help needed with ACC317 Advanced Federal Taxation

Accounting
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Other advantages and disadvantages to selecting an S Corporation status?

Nov 6th, 2015

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Advantages of Selecting an S corp status

  • Shareholders assets are protected - A shareholder is not in any way responsible for the liabilities of the corporation. Thus, creditors cannot pursue his personal assets.
  • Shareholders of an s corp can still be employees of the organization and still receive salaries as employees. They can receive various distributions that are tax free in comparison to what they have invested in the business.
  • During transfer of ownership an s corp , interest can be transferred freely with no trigger in adverse tax consequences. No adjustments on the interest are needed when ownership is transferred
Disadvantages
  • costly startup and ongoing expenses - Before an s corp can become a fully functional business, the fees required for it to  be legit is costly compared to what a partnership or a sole proprietor incurs
  • Closer IRS scrutiny - As certain employees are sometimes the shareholders and distributions such as dividends are offered to them, IRS scrutinizes the payments to confirm they match reality

Please let me know if you need any clarification. I'm always happy to answer your questions.
Nov 6th, 2015

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