The Tax Benefits of an S-Corporation

By QuickBooks

1 min read

You have a great new product or service you can’t wait to present to the world. That’s awesome. But as a small business owner, it’s all too easy to get carried away by your inspiration. For inspiration to carry you to success, you need to give it some structure—the proper business structure, that is. Choosing a business structure—also known as a “business entity”—is one of the first steps in what will be a long and rewarding journey—so long as you choose the right one. After all, your entity determines how your business can be run, including how it’s allowed to raise capital and pay taxes. But between a C-Corporation, S-Corporation, sole proprietorship or partnership, how do you choose the right one? It depends on the kind of business you want to run.

As Luxelab co-founder David Abrams explains below, when it came to choosing a business entity, the proper choice for his business was an S-Corp. David and his business partner, Jason Lara, both felt that the entity’s pass through feature for incoming revenue was important for managing all of Luxelab’s locations. Since Luxelab has a number of specialty salons in Los Angeles, each of which is an independent S-corporation owned by David and Jason, the S-Corp’s structure would protect the business as a whole should a loss occur at any single location.

As David points out, picking the right entity for a business sets a solid foundation for growth and financial management down the line. Once you know exactly what kind of business you want to run, see which entities are best at suiting the needs of both you and your business. Raising capital, paying taxes and the amount of liability protection you want to have are all crucial factors to consider. The right entity is the framework upon which your entire business is built. Choose it wisely, and you’ll be paving a path to success.

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Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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