Question:

What is an S Corp?

Answer:

An S Corp is not a type of business entity, but a tax treatment that is applied to a business entity.

Starting A Business? Confused About The Types Of Entities?

Here are some things to think about when conducting business:

Legal treatment – these are things such as what protects yourself, what protects your personal assets from liability from the business

Tax treatment – this dictates how advantageous your taxes are, what deductions you get, and what things you decide to write off

An S Corp can be applied to an LLC, corporation, benefit corporation, professional corporation – basically any type of business entity. The business entity is the legal entity that keeps you protected, while the tax treatment is what dictates how you pay taxes.

If you add on an S Corp election to a LLC or corporation, it does not change the business entity itself, but changes the tax treatment. For an S Corp election, you must take an additional step with the IRS when filing for your LLC or corporation. You will then be treated as an S Corp for tax purposes.

To Wrap Up…

An S Corp is not a business entity, it is a tax treatment. It does not change your LLC or corporation, but your LLC or corporation becomes treated as an S Corp for tax purposes. There are many types of business entities so if you still have any questions, feel free to reach out to our team for a free 30-minute consultation at bertie@inbetterwetrust.com. We’ll walk you through your additional questions and see how else we can assist you!