What is an S Corporation and what are its tax advantages?

An S Corporation is a type of business entity in which the owners, or shareholders, receive tax benefits from the government. This type of corporation is available in the state of Massachusetts and is one of the most popular types of business entities for small businesses. An S Corporation is a corporation that has elected special tax status with the Internal Revenue Service (IRS). This special status allows the S Corporation to bypass double taxation, which is common with other corporations. Double taxation occurs when the corporation pays taxes on its income and then the owners of the corporation pay taxes on their dividends. With an S Corporation, the owners of the corporation only pay taxes on their dividends, which allows them to reduce their total tax burden. In addition to avoiding double taxation, S Corporations can also help to reduce their taxable income. Income is distributed directly to the shareholders and limited to their salaries, instead of being taxed at the corporate level. This allows for the corporation to lower its overall taxable income. Overall, S Corporations offer a number of advantages to their owners in terms of taxes. By avoiding double taxation and reducing taxable income, they are able to help their owners save on taxes. This makes them a popular choice for many small businesses, especially in the state of Massachusetts.

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What is an S Corporation and what are its tax advantages?

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