The S Corporation is a corporation that chooses to be taxed under Subchapter S of the Internal Revenue Tax Code. Being an S Corporation is a tax matter only. S Corporations are “tax pass through” business entities, meaning their profits and losses are reported by their owners on the owner’s’ personal tax returns. This is the most likely to be recommended (other than the LLC) form of incorporation.
You can file to incorporate as an LLC and be taxed as an S-Corporation and that’s one of our favorite ways to set things up because you can save money on self-employment taxes by paying yourself a reasonable salary through payroll and receiving all other profits as non self employment taxable distributions.
If you are an LLC not taxed as an S-Corporation, ALL of the profits are subject to self-employment tax PLUS you are more likely to be audited if the business tax return is filed on your personal tax return and not separately.
A corporation is an entity that has the authority to act as a single person distinct from the shareholders that make up the corporation. Some of the advantages to operating a corporation include its limited liability for shareholders, centralization of management and status as a separate legal entity.