Incorporation · Operations

What are the key reasons/benefits for choosing to file for S Corp status?

Lydia Loizides Founder and CEO @GGGrit

April 8th, 2013

Not sure of near term benefit and my understanding is that you can elect this status again when you file your first years' return.  Thoughts?

Gwan Yip Director at LOR LLC

April 8th, 2013

I was actually just reading this earlier which was useful http://mashable.com/2012/02/17/small-business-incporporation/

Lilia Tovbin Co-founder at BigMailer.io

April 8th, 2013

The immediate benefit is that you can have business losses from your early years flow through your personal income (deducted from your taxable income). S corp status is practical in the early stages, especially for small teams of co-founders.

Reem

April 8th, 2013

Be careful, the key points come at the end of Gwan's article:
-  If you're going to raise funding, VCs will want a C corp. It's easy to go from S-corp to C-corp but complicated to go from LLC to C
- You only have a short window to make the S election after first incorporating as a C corp: "Take note that the deadline to elect S Corp treatment is March 15 for existing companies (or 75 days from the day your company is formed)." from the article above, though I'm not sure in which circumstances the March 15 deadline applies.
- Otherwise, as Lilia pointed out, being an S corp (or LLC) will allow you to deduct the losses from your start-up.