One is the entrepreneur's ability to do effective tax planning, which is a benefit that can be simple to quantify because you can calculate your savings. The other is more difficult to describe, but I like to think of it as the benefit of leading a tidy life. Business owners who want to attract sophisticated investors or take a company public or sell it can face big headaches if their corporate house is not in order, Aidun observes. For Williams's company, growth came so quickly that she soon realized she needed to make some changes. After a year of operation, I switched to a new accountant, who suggested that I change to S-corporation status to give myself that limited liability.
S corporations have other benefits for entrepreneurs, especially in how they are taxed.
Put simply, their profits are usually taxed just once, at the shareholder level. Generally, profits in C corporations are taxed first at the corporate level and then again at the shareholder level, if they're distributed in the form of dividends. Fortunately for Black Cat, the switch from sole proprietorship to S-corporation status was a relatively simple one. Business owners face the biggest risks when they try to change a company from a C corporation into a limited-liability company. The LLC is a relatively new form of corporate structure that has gained popularity and acceptance by almost all states in the past 10 years.