- Pass-through taxation: An S Corp is a pass-through entity, which means that the company’s profits and losses are passed through to the individual owners’ personal tax returns. This can result in a lower overall tax rate for the business and its owners.
- Self-employment tax savings: As an owner of an LLC taxed as an S Corp, you may be able to reduce your self-employment taxes by paying yourself a reasonable salary and taking the rest of your income as a distribution, which is not subject to self-employment tax.
- Limited liability protection: An LLC provides limited liability protection to its owners, meaning that the owners’ personal assets are typically shielded from business liabilities and debts.
- Flexibility in ownership structure: An LLC taxed as an S Corp can have multiple classes of ownership interests, allowing for flexibility in how profits and losses are allocated among the owners.
- Easy to set up and maintain: An LLC taxed as an S Corp is relatively easy to set up and maintain, with less paperwork and administrative requirements compared to a traditional corporation.
It’s important to note that the tax benefits of having an LLC taxed as an S Corp may vary depending on individual circumstances, so it’s always a good idea to consult with a tax professional or financial advisor before making any decisions.