A Chicago S Corporation Attorney

S-Corps are a worthwhile consideration for individuals or groups of people looking to form a business in Illinois. It has some of the best advantages of LLCs or Series LLC, and avoids the negative aspects of the C-Corp. S-Corps are their own entity with the ability to sue or be sued. Following are some of the advantages and disadvantages to examine when considering filing for an S-Corp in Illinois, according to our Chicago S Corporation attorney. 

What are the Advantages of an S-Corp?

There are considerable advantages to an S-Corp. They include:

• Limited Liability: Asset protection is a top priority for all shareholders, and there is protection for the shareholders of an S-Corp. Generally speaking, shareholders are not liable for the liabilities, debts, and obligations of the corporation. This protective shield is a distinct advantage offered by S-Corps.

• Ability to Transfer Ownership: It is a relatively easy process to transfer interest in an S-Corp. A simple transfer of stock is all that is required. There are no corporation adjustments which must be made or special accounting that must take place. 

• Accounting Method: S-Corps that do not have inventory are allowed to perform their accounting on a cash basis. 

• Administrative Simplicity: Many business owners are attracted to the simplicity of administering an S-Corp. The shareholder and director meetings required by some other incorporation types are not required in an S-Corp.

• Pass-Through Taxation: S-Corp’s do not have the same “double taxation” pitfall as C-Corps. Any profit or loss of the S-Corp flows directly through to the personal taxes of the shareholders. There is no tax directly to the corporation at the corporate rate. 

Disadvantages of an S-Corp

There are some disadvantages to incorporating as an S-Corp. They include:

• Shareholder Limitations & Restrictions: S-Corps limit who may be an owner of the corporation. There can not be any more than 100 shareholders, and no owner may be a foreigner, or certain types of trusts and other entities. Also, there may only be one class of stock, meaning all investors have the same distribution rights. 

• IRS Review: The IRS tends to keep a watchful eye on S-Corps due to the fact that shareholders may be paid through dividends or salary. By paying owners lower wages and allotting profits as distributions, an S-Corp can avoid having to pay self-employment taxes.      

• Calendar Year:  Under most circumstances, a C-Corp is required to operate pursuant to the calendar year as its tax year.

Consult With An Experienced Chicago S Corporation Attorney At The Law Office of Alexis Hart McDowell

Deciding on the best entity formation for your business is a decision that requires careful deliberation and consideration of all of the available options. At the Law Office of Alexis Hart McDowell, we are here to provide you with the knowledge you need to make the best decisions for your professional goals. Schedule a consultation with a Chicago S Corporation attorney at Enterprise Esquire so we can start the incorporation process. Our firm also offers a cost-efficient S-Corp incorporation package.