Determine one 1 advantage to selecting an S corporation stat

Determine one (1) advantage to selecting an S corporation status. Provide a rationale for your advantage.

Determine one (1) disadvantage to selecting an S corporation status. Provide support for your determination.

Solution

one (1) advantage to selecting an S corporation status:

Limited liability: Company directors, officers, shareholders, and employees enjoy limited liability protection.

An S corporation protects the personal assets of its shareholders. Absent an express personal guarantee, a shareholder is not personally responsible for the business debts and liabilities of the corporation. Creditors cannot pursue the personal assets (house, bank accounts, etc.) of the shareholders to pay business debts. In a sole proprietorship or general partnership, owners and the business are legally considered the same—leaving personal assets vulnerable.

one (1) disadvantage to selecting an S corporation status. Provide support for your determination:

Formation and ongoing expenses. To operate as an S corporation, it is necessary to first incorporate the business by filing Articles of Incorporation with your desired state of incorporation, obtain a registered agent for your company, and pay the appropriate fees. Many states also impose ongoing fees, such as annual report and/or franchise tax fees. Although these fees usually are not expensive, and can be deducted as a cost of doing business, they are expenses that a sole proprietor or general partnership will not incur.