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Many small business owners favor the S corporation structure because of its tax benefits. This type of business entity has the same legal protections as a C corporation. Unlike C corporations, profits distributed to shareholders arent generally taxed at the corporate level.
Although being taxed like an S corporation is probably chosen the least often by small business owners, it is an option. For some LLCs and their owners, this can actually provide a tax savings, particularly if the LLC operates an active trade or business and the payroll taxes on the owner or owners is high.
A pass-through business is a sole proprietorship, partnership, or S corporation that is not subject to the corporate income tax; instead, this business reports its income on the individual income tax returns of the owners and is taxed at individual income tax rates.
S corp. An S corporation, sometimes called an S corp, is a special type of corporation thats designed to avoid the double taxation drawback of regular C corps. S corps allow profits, and some losses, to be passed through directly to owners personal income without ever being subject to corporate tax rates.
Unlike sole traders who pay 20% - 45% income tax, limited companies pay 19% corporation tax, so a limited company business structure would be best for tax purposes.
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In terms of tax implications, sole proprietorships are considered a pass-through entity. Also known as a flow-through entity or fiscally transparent entity, this means that the business itself pays no taxes.
As a business owner, you will be responsible for paying a variety of local, state and federal taxes. These can include income tax, much like employees pay on their income, plus additional payroll taxes, business licenses and permits, sales and use taxes, and self-employment taxes.
Taxes on S corporations are lower than on non-S corp. LLCs. As an LLC owner, youll incur steep self employment taxes on all net earnings from your business, whereas an S corporation classification would allow you to only pay those taxes on the salary you take from your company.

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