This is sometimes referred to as "double taxation." Shareholders who receive profit distributions are also taxed on those profits. Corporations are taxed as C corps., which means they file a corporate tax return and pay corporate tax. Your new business entity will, by default, be taxed in a certain way. Before you can be an S corp., you must form a corporation or an LLC by filing paperwork with the state. advantages, it's helpful to understand the difference between a business entity and its tax status. Read on to figure out if it's right for you. Both corporations and limited liability companies (LLCs) can choose to be taxed as an S corp.īut there are also some disadvantages, and not every business is eligible to be an S corp. is a tax designation that allows a company's profits to pass through to the owners' personal tax returns. S corporations have tax advantages that make them a good choice for many small businesses.
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