For small and medium-sized businesses there are a handful of common entity structures. The business can be a sole proprietorship, partnership, LLC, S corp, or C corp. With all of these options, what are the benefits of selecting an S corp? Listed below are 8 unique S corp advantages compared to the other entity options. I wanted to think “outside the box” and come up with reasons you don’t normally see in other guidance. 

S Corp Advantages

1. Elimination of Self-Employment Tax – This is the most common reason for your business to be taxed as an S corp. With an S corp you only pay FICA/self-employment tax on your reasonable salary rather than 100 percent of your business profits. Since your reasonable salary is less than your business profits (if done correctly), you will pay less in taxes.
2. Additional Tax Strategies –  An S corp opens up additional tax strategies for minimizing your business’ tax liability. The most common I see is the “Augusta Rule”. With the Augusta Rule, the S corp is able to reimburse (and deduct the expense) the business owner for event space or team meetings in their primary residence tax-free. This tax strategy is only available for 14 days or less in a calendar year and must be for business-use (i.e. – corporate retreat, board of directors meetings, etc…).
3. Pass-Thru Taxation – Profits from S corps pass-thru to the individual shareholder(s). There is no tax at the corporate level. S corps avoid double taxation compared to C corps which are first taxed at the corporate level (currently 21%) and then again when paid out (via payroll or dividends) to shareholders. Due to this, S corps will (almost always) pay less in taxes than C corps with identical profits.
4. Self-Employment Tax Form Support – A downside of being self-employed is the lack of tax form support needed for loans, mortgage, and citizenship applications. A common request is to provide a W-2 which single-member LLCs or partnerships don’t receive. With an S corp, the owner will receive a W-2 each year that can be used as support in these examples.
5. Continuous Existence – S corps are a distinct entity so they exist indefinitely. The business will continue after death of a shareholder which is not the case for single-member LLCs. This makes estate planning easier.
6. Stock Issuance – Unlike single-member LLCs, S corps are able to issue stock. The ability to issue stock makes raising money or obtaining outside investment more attractive. 
7. State Tax Deductions – Many states offer a “pass-thru entity tax election”. This allows the business to pay the shareholder’s personal state tax liability and take a deduction for it. With a single-member LLC, business owners can’t deduct state tax payments. However, having an S corp makes this an option. The additional deduction reduces your tax bill as well.
8. Privacy – The last of the S corp advantages I wanted to mention relates to privacy of the business owner. Often times, vendors, landlords, lenders, etc… will ask for business tax returns to review your business’ financial health. If you have a single-member LLC, the only support to provide is the Schedule C on your Form 1040. The Form 1040 includes all of your household’s personal income and deductions (wages, investments, rental properties, donations, mortgage interest, etc…). This is likely information you wouldn’t feel comfortable sharing with a stranger. An S corp has a separate business tax return (Form 1120-S), so you can keep your personal financial information private.