Start a Louisiana S Corp

Advantages of a Louisiana S Corp

What are the advantages of a Louisiana S Corporation? The IRS treats the Louisiana S Corp as a “pass-through entity.” This means that profits and losses pass through to shareholders without being taxed at the corporate level. C Corporations, on the other hand, are subject to double taxation—once at the corporate level and once on individual shareholders’ income taxes. 

Filing as an S Corporation can also save business owners on self-employment taxes. This is because S Corp income is split into salary and distribution, and the IRS only requires owners of business corporations with S Corp status to pay 15.3% self-employment taxes on salary income. You don’t have to pay self-employment income taxes on distribution income. 

What type of company can file as an S Corp?

The IRS allows only certain companies to file as an S Corporation. S Corps must meet the following requirements:

• Have only one class of stock
• Be owned by US citizens or resident aliens, including individuals and “certain trusts and estates”
• Have fewer than 100 members

When filing S Corp documents with the IRS, all corporation shareholders must sign Form 2553 Election by a Small Business Corporation.

Can LLCs choose an S Corporation election?

Yes, Louisiana LLCs can choose an S Corp election. Is an S Corp an LLC? Not necessarily, but an LLC can become an S Corporation for tax purposes by filing a form. An LLC may want to file as an S Corporation to gain tax benefits such as reduced self-employment taxes. Learn more about the tax consequences of business structures in our article, Tax Information for Limited Liability Companies.

Weighing the Pros and Cons of Creating an S Corp

Should you file as a Louisiana S Corporation? Here are points to consider before making this business decision.

Louisiana S Corporation Pros

An S Corporation offers many advantages:

• Allows for pass-through taxation
• Reduces self-employment taxes
• Allows for the cash method of accounting
• Provides business stability

These tax advantages can often save business owners significant money.

Louisiana S Corporation Cons

However, an S Corporation comes with some downsides:

• More expensive formation
• Tax qualification obligations
• Stock ownership restrictions
• Closer IRS scrutiny
• Can restrict a business’s growth

After considering these factors, you can discuss your business formation decision with us, and we’ll handle the Louisiana S Corporation filing requirements. That way, you can focus on what you do best—getting your business running and profitable.

We can help

When you contact us to assist with business formation, we’ll be there to support you every step of the way. We give you information to help you decide what business structure may be best for your company and then handle your formation filings. Before deciding on a business structure, consult your tax advisor about the benefits of an S Corp.

In addition to helping with any filing requirement, we can assist with business formation and continued compliance filings, making the business ownership process as easy as possible. Contact us to form your Louisiana S Corporation today.