Choosing to operate as an S-Corp can provide numerous tax advantages for small business owners. Here are some strategies to maximize these benefits:
Pay yourself a reasonable salary that reflects the work you do for the business. This helps avoid IRS scrutiny and ensures compliance with tax regulations.
Understand the difference between salary and distributions. While salary is subject to payroll taxes, distributions are not, allowing for potential tax savings.
Maintain meticulous records of all business transactions, including income and expenses. This will support your tax filings and help in case of an audit.
Utilize retirement plans available to S-Corps, such as a 401(k), to reduce taxable income while saving for the future.
Strategic planning can enhance the benefits of your S-Corp status.
