The corporation then supplies you with a Form K-1 reporting your individual share of these items. C corporations have traditionally offered better deductions for employee benefits. However, as Congress has raised the deduction for Self-Employed Health Insurance , this advantage is disappearing. Their double taxation makes them inefficient vehicles for passing dividend income to shareholders. And they can t pass losses through to shareholders like proprietorships and partnerships.
Some practitioners go as far as to say the C corporation is dead for small business.
S corporations are good for startups where you anticipate losses. S corporations may also let you draw part of your income in the form of dividends and avoid self-employment tax. Once you ve established your business, be sure to deduct every expense the law allows. You can deduct any expenses that are ordinary and necessary for running the business, paid or incurred in the tax year that you take the deductions. For example, you can delay billing clients until after the close of the year, or prepay expenses before then.