It lets you write off your salary, which lowers your payroll taxes 2 ways starting an S corp can help you save money on taxes Related How to Prevent Someone from Stealing Your Million-Dollar Idea Starting a Business 1. S corp owners must also pay taxes on the company profits, even if you leave them in the corporation and don’t take them as a distribution, which for S corps, is usually not in the form of dividends.įor the purpose of this article, we’re going to focus on single-owner S corps. The catch? S corp owners are required to pay themselves a “reasonable salary” as employees and that salary is subject to payroll taxes (more on this below). Unlike C corporations (C corps), where both the business and owners pay income taxes, an S corp avoids double taxation as a pass-through entity. S corps are considered pass-through entities, which means that your business doesn’t pay taxes on the profits you earn-you, the owner do. This protects your personal assets if your company is ever sued. This means you’re not personally responsible for any debts or liabilities for the business since it’s separate from you as a person. S corps, definedĪs an owner of an S corp, you receive something called limited liability protection.

Yep, there’s more to tax rules for S corps than meets the eye. Converting your business to an S corp-or starting an S corp-can save you some serious bucks on your taxes. The second? They’re popular for a reason. The first thing you should know about S corps is that they ARE really cool-but not too cool for you.

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