S-Corporation Formation Lawyer San Diego

S-CORPORATION FORMATION LAWYER San Diego

S-CORPORATION FORMATION

S-Corporations have many benefits, the greatest of which involves tax liability, but they also have some drawbacks and strict legal requirements. That’s why it’s important to discuss your business plans with an S-Corporation Formation Lawyer to learn what’s right for your company. We specialize in the intricate legal requirements and the variety of documents surrounding forming an S-Corporation business entity.

What Is an S-Corporation?

An S-Corporation is actually a tax designation that allows for these business entities to be taxed under IRS code Subchapter “S”. So what does that mean? Essentially, an S-Corp is considered a pass-through tax entity, whereby the corporation itself pays no federal corporate income taxes. Instead, those taxes are passed onto the shareholders to be paid on their individual tax returns at their typical marginal income rate (anywhere from 10-37% based on their income bracket).

C-Corporations, on the other hand, have to pay federal income tax on their profits and losses at the corporate rate (21%), and their shareholders also have to pay personal income taxes on the dividends they get from the business. This is sometimes referred to as “double-taxation” and is one of a variety of reasons people may choose to go with an S-Corp instead.

S-Corporations still have the liability protections of a corporation, but with these additional tax advantages. That means if something were to happen to your business legally, you would not be responsible for it personally in the same way you could be as a sole proprietor or partnership. An S-Corporation Formation Lawyer San Diego can help you figure out if the benefits of an S-Corp will be worth it for your business model.

What are the Disadvantages of an S-Corporation?

So it seems like S-Corporations are great, right? You don’t get double taxed and you still have liability protection, plus you can even pay yourself a salary and dividends while only having to pay self-employment tax on the salary portion. Why doesn’t everyone just form an S-Corp?

Well, S-Corps have very strict legal rules to follow in regards to tax laws, shareholders, ownership, and procedural/operational requirements. We can can walk you through the pros and cons of how an S-Corp would function for your business, but here are some basic drawbacks:

Can’t have more than 100 shareholders, which means can’t be a public company
Must be owned by individuals who are U.S. citizens or permanent residents
Also available to certain domestic trusts, estates, and tax-exempt organizations
Receive extra IRS scrutiny, especially related to income and dividends disbursements
Very strict operational requirements that can lead to legal or tax penalties if not followed

Do I Need an S-Corporation Formation Lawyer San Diego?

Forming an S-Corporation requires a variety of documents and a good understanding of the legal requirements surrounding that business entity. If you haven’t gone to law school yourself, getting the expertise of an S-Corporation Formation Lawyer San Diego will be extremely helpful as you navigate the process.

Bagla Law Firm is your premier San Diego S-Corporation Formation Lawyer with years of experience helping people like you start their own businesses and form successful corporations. If you’re interested in learning more about S-Corporations and your business entity options, schedule a consultation to sit down with us and discuss what’s right for you.

Kelly Bagla, Esq.

High Net-Worth Business Attorney, Kelly Bagla is an international award-winning corporate lawyer and entrepreneur. Affectionately known by her clients as, “Queen of Business Law®,” Kelly protects high net-worth individuals and business owners through custom legal strategies.

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