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Overview of S Corporations

The S corporation features the same limited liability protection as the C corporation.  Business owners select S corporation status to avoid the double taxation of a C corporation.  Only the S corporation's shareholders are subject to taxes (unlike a C corporation, the S corporation pays no tax). Because S corporations are taxed as proprietorships or partnerships, many people erroneously think that the S corporation similarly loses the limited liability feature of the C corporation.  Consider only tax factors when deciding whether to become an S or C corporation.  Leave this decision to your accountant.

It is easier to lawsuit-proof the stock ownership of a C corporation. S corporation shares must be owned by natural persons, or disregarded entities, such as a single member LLC.  C corporations, limited partnerships, multi-member LLCs and other legal entities — with few exceptions — cannot own shares of an S corporation.  You then have fewer options to protect your S corporation shares from personal creditors.  However, you may protect S corporation shares in several ways.  The S corporation has other key features:

— The S corporation has pass-through taxation.  Corporate profits are taxed only once when they pass through to the shareholders.  The S corporation is thus taxed as a proprietorship or partnership.  The corporation itself is not taxed, its owners are.

— The S corporation is limited to 100 shareholders.  Its shareholders must all be U.S.  citizens or residents.

— The S corporation must be organized under U.S.  law, have only one class of stock and not own 80% or more of the stock of another corporation. S corporation status is granted by the IRS.  It is possible to change from C to S corporation status, within certain rigid IRS guidelines.


You may think that your wealth is safe and that you don't need protection. But don't delude yourself and accept reality — for every 60 minutes you spend making money, spend 60 seconds thinking about how to protect it!
The Presser Law Firm, P.A. - Asset Protection Attorney
Located at 6199 N. Federal Highway Boca Raton, FL 33487. View Map
Phone: (561) 953-1050