Per Diem Rates from the U.S. General Services Administration
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Rates are set by fiscal year, effective October 1 each year. Find current rates in the continental United States ("CONUS Rates").
Advantages of an S corporation
Personal Liability Protection
Shareholders receive personal liability protection. This means, your personal assets can't be taken to satisfy business-related debts. In addition, if the s corporation is sued, your personal assets are insulated from such law suits.
Electing S corporation status is a tax election and does not affect the legal status of the entity. If the entity was a C corporation or LLC prior to conversion to S corporation status, those entities remain subject to the laws of the state of formation which govern corporations and LLCs.
Opportunity to Reduce FICA Taxes
By paying yourself the lowest reasonable salary and taking cash distributions, you can reduce FICA taxes. The lower your salary, the lower the FICA taxes, and distributions are tax-free!
Two Caveats!
1. Pay yourself a reasonable salary. A "reasonable" salary is not defined by the IRS. Use common sense. What would you pay someone to work for your company who is unrelated to you and has equivalent experience? Check industry compensation standards that apply to your industry and your businesses geographic location.
If the IRS suspects foul play and you're audited, the IRS can reclassify any distributions you've taken as taxable compensation and assess all related employment taxes plus interest and penalties. If your business is new and isn't generating much income or is losing money, a lower than typical salary could be justified. But never take only distributions without ever paying yourself any salary.
2. Distributions that exceed your stock basis can create a capital gain. When taking distributions, keep in mind that if any distribution exceeds your stock basis, the excess amount of the distribution is subject to capital gains tax.
Double Taxation Avoided
The pass-through feature of an S corporation is what makes it possible to avoid double taxation of income. S corporation income is not taxed at the entity level, it is passed through he entity to its shareholders where it is taxed only once at the individual level. In contrast, C corporation income is taxed twice. First, at the corporate level and a second time at the shareholder level when income is distributed to shareholders as dividends.
Losses are Deductible
S corporation shareholders get to deduct losses against other income reported on their individual income tax returns, such as a spouse's salary from a job, interest and dividends. C corporations do not enjoy this benefit. C corporations only deduct losses at the corporate level. For a new business, where losses are common the first year or two, being able to deduct a loss against other sources of income can be very helpful.