What are the tax advantages of an S corporation?

Coralie Goldsberry: An S corporation election allows the shareholders to preserve the benefit of limited liability for the corporate form while at the same time being treated as partners for federal income tax purposes.Ever wondered why so many small businesses operate as an S corporation? Simple. An S corporation saves business owners big taxes in three separate ways:Benefit #1: Passthrough LossesFirst, as compared to regular corporations (sometimes called C corporations), S corporation owners can use the business’s losses incurred during the early lean years on the owner’s personal returns as deductions. Benefit #2: Lower Payroll TaxesAs compared to almost every other business form, S corporations can save their owners taxes from self-employment or Social Security/Medicare. Benefit #3: No Corporate TaxS Corporations also provide a third benefit in the tax arena because they don't pay corporate income taxes. In other words, S corporations get to avoid the well-known ! "double-taxation" problem. However, the "no corporate income taxes" benefit often isn't a savings for small corporations....Show more