Why You Should NEVER Form an S-Corp!

Why should you never form an S-Corp? Most are not aware that an S-Corp is actually not a business entity. It’s simply a tax classification. Both LLCs and corporations can make an S-Election and choose to be taxed as an S-Corp. In fact, an LLC can be taxed as a partnership, an S-Corp, or even a corporation. But with an LLC, you get the tax treatment that best fits your personal situation, but also the asset protection that a corporation can’t give you. If you ever get sued and have a judgment against you, the judge can easily give possession of your corporate shares to the creditor, who can then liquidate the shares and get paid. With an LLC, it’s much harder for the judge to do that, thanks to something called the charging order protection, which is a protection that, unfortunately, corporations don’t have. So if, after consulting with your CPA, you think an S-Corp is right for you and your business, please set up an LLC as your business entity and have it elected to be taxed as an S-Corp. This way, you’ll have the best of both worlds, the protection of an LLC and the tax benefits of an S-Corp. And this answers the question…