Why Be an S Corporation?
Ten years ago Robert Luther founded Construction Technology, in West Palm Beach, Fla., as an S corporation. "Since there were no shareholders except me, I didn't see any advantage to C-corporation status, since my earnings would have been taxed twice." Since then, Luther has found it simple to comply with financial-reporting rules. (S-corporation shareholders report corporate financial results on their personal tax returns, just as partners do.) But since Luther plans to start awarding stock to employees, he may eventually switch corporate status because of a rule that limits the number of S-corporation shareholders in a company to 35. For more on corporate status, see S Corporations and Small Business Stock (TIPS-34), free from Price Waterhouse (National Administration Center, 1410 Northwest Shore Blvd., Tampa, FL 33602).
-- Jill Andresky Fraser