3 Tax Benefits of Single Shareholder S Corp tax elections. --  Kiritsis Law Firm Group 212 922 0005

Apr 27, 2021

Most S Corps are owned by a single shareholder, who mostly made that tax election, for the purported tax benefits.

1. Pass-through tax treatment. The sole shareholder would be able to receive a flow of the S Corp's profits and distributions, which have not been taxed at the entity level, which is in sharp contrast to C Corp shareholders, where the C Corp pays taxes at the entity level, and then when it distributes the remaining profits to shareholders by dividends, they also pay taxes on the individual level.

2. Separate tax return. Single S Corp shareholders have the business's operations, be reported on an entirely separate tax return (Form 1120S), which is only, an information tax return, because there are no taxes due with Form 1120S.

3. 20% income deduction. The new tax law allows certain business owners, operators and investors to deduct 20% of their business income, under a certain set of requirements being met. Having a business elect S Corp tax election could bolster a taxpayer's position; in properly claim S Corp tax election.

 

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