Double Taxation Example:

Company Revenue: $500,000
Business Expenses: $350,000
Corporate Profit: $150,000

Level 1 – Corporate Tax (21%):
$150,000 × 21% = $31,500

After-Tax Profit: $118,500

Level 2 – Dividend Tax (15-20%):
$118,500 × 15% = $17,775

Total Tax Paid: $49,275
Take-Home: $100,725

*Example for illustration only. Actual tax situations vary. Consult a tax professional.

Pass-Through Example:

Company Revenue: $500,000
Business Expenses: $350,000
Net Income: $150,000

Owner’s Salary: $60,000
(Subject to payroll taxes ~15.3%)

Distributions: $90,000
(No payroll tax, only income tax)

Payroll Tax: $9,180
Income Tax (est. 24%): $36,000

Total Tax: $45,180
Take-Home: $104,820

Savings vs C-Corp: $4,095

*Example for illustration only. Actual tax situations vary. Consult a tax professional.

S-Corp Advantages

• Tax Savings: Avoid self-employment tax on distributions
• Credibility: Corporate structure adds legitimacy
• Asset Protection: Personal assets protected from business debts
• Pass-Through Taxation: No double taxation like C-Corps
• Investment Opportunities: Can still attract investors
• Estate Planning: Easier transfer of ownership

S-Corp Limitations

• 100 Shareholder Limit: Cannot exceed 100 owners
• US Only: Shareholders must be US citizens/residents
• One Class of Stock: Cannot have preferred shares
• Strict Requirements: Must file annually with IRS
• Payroll Complexity: Must run formal payroll
• State Restrictions: Some states don’t recognize S-Corps