S Corporations

Generally, no Federal tax is imposed on the business entity. Income and expenses are allocated among shareholders. Taxable income is subject to individual rates from 10% to 37%, whether profits are distributed or not. Losses pass through to shareholders. Restrictions on loss deductibility apply. State treatment of S corporations may vary.*

Shareholders are shielded from personal liability for business debts. Only their investment is at risk.

* Owners of business entities, which are not taxed as ā€œCā€ corporations, are eligible for a 20% Qualified Business Income (QBI) deduction. The deduction for QBI may be limited and/or subject to phase-out, depending on the taxable income of the individual, as well as such factors as the type of business, amount of wages paid by the business, and amount of capital assets owned by the business. For income above $326,600, the legislation phases in limits on what otherwise would be an effective marginal rate of not more than 29.6%.