S Corps

Subchapter S Corporations or "S Corps" 

  • Just what is an S-Corp?
  • Is an S Corp better than an LLC? 
  • What are the differences between 
  • How do I set up an S Corp in Maryland/?

The firm gets questions like these regularly.   First of all, "S Corporations" are NOT a type of business entity!   Instead, they are a TAX STRUCTURE that can be applied to EITHER corporations OR to Limited Liability Companies in the State of Maryland.   Second, the tax structure has some similarities and some differences from the standard S-Corporation taxation.

What's so great about an S Corp?  

Benefits include the ability to pass-through profits (and loss) to the owners without paying double taxation.

In some cases, if the business will make more money than a reasonable salary for an owner, the owner MIGHT be able to treat SOME of the S-Corp income as dividend income at a more favorable tax rate.  At time of writing, this is generally not available to a pass-through limited liability company with the default tax classification. Whether or not structuring as an S Corp benefits a particular business will depend on the type of business and should be  discussed with your accountant.  However, not every business will qualify. 

What are the cons or limitations of setting up a business as a subchapter S corporation?

S-Corps are limited in the number of owners.

S-Corps are not available if there will be any foreign (non-US) owners.  

Alas, service oriented businesses (like law firms or consulting businesses) may be stopped from classifying some income as dividend income. 

How do I set up an S Corp? 

Talking to your attorney is highly recommended!   The process starts by forming an entity.  You may also want to talk to your accountant to run the figures based on your particular estimated profits.  If you don't already have a business attorney, Arden Law Firm offers a no-cost initial phone call of up to 10 minutes as well as flat fees for most business formation services in Maryland.  Call the firm at 410-216-7000 for more information about setting up an S Corporation in Maryland.  

Arden Law Firm doesn't offer accounting or tax services, but we can set up a new S Corp corporation or LLC for a flat fee!  

© ArdenLawFirm 2014-2018  Managing Attorney Cedulie Laumann, Esq.