Should I incorporate?

Whether you choose the S corporation, C Corporation, or LLC, setting up a corporation for your business gives you a layer of liability protection. This extra layer of protection can protect business claims from getting through to your personal assets.

S corporations have been around for many years. If you have contemplated switching your current business status or are looking at setting up a new entity, you may want to consider the benefits of the new and improved S corp. With an S Corporation you can:

Able to protect you from personal liability. Able to avoid double taxation. Able to allow up to 100 shareholders. Able to save owners 15.3% in self-employment taxes.

A 2004 tax law opened up the S corporation status to a whole new set of previously disqualified small and midsize businesses. Many of the benefits enjoyed by other corporation types (limited liability corporations (LLC) and C corporations) are now available with the S corporation.

If using an attorney, a typical S corporation setup should cost $500-$1,000 depending on what you can do yourself. An S corporation does require a recording of annual board minutes and filing tax return form 1120S. Each shareholder of an S corporation should receive a K-1 IRS form to report their share of the annual earnings.

If you are considering switching over to an S corporation for an existing business, you must file IRS form 2553, Election by a Small Business Corporation, by March 15. You can download the form at http://www.irs.gov/pub/irs-pdf/f2553.pdf.