Serving business owners since 2007Not necessarily. Unless you have already formed your corporation, you should consider an LLC as an alternative. You can get the same limited liability protection of an S Corporation plus pass-through tax benefits that outshine those enjoyed by an S Corporation.
LLC members may be able to deduct more of their share of the business’s losses on their tax returns in a year than S Corporation shareholders could. An S Corporation shareholder can deduct no more than the “basis” in his stock (amount paid for the stock, plus and minus adjustments during the corporation’s life, and plus any personal loans to the corporation). An LLC member can deduct more because his pro rata share of all money borrowed by the LLC can be added to his personal loans to the LLC when calculating the maximum he can deduct in a given year.
Tax issues are very complex so it is always advisable to consult with an expert tax advisor before making any final decisions.
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