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Entrepreneurial Management: S-Corporation Revisited

If you haven't considered S corporation status for your company recently, it may be time to take another look.

While limited liability companies (LLCs) have gotten a lot of press lately (and deservedly, in our view), the S corporation is still the vehicle of choice for an uncomplicated way to combine legal liability protection with avoidance of double taxation on earnings.

Recent changes in the tax law have made them even more attractive in certain situations. Highlights:

• Limited to 75 stockholders, up from 35 previously,
• Ability to own subsidiary corporations, including C or S corporations, not previously permitted at all, and
• More flexibility in trust ownership of S corporation shares, such as for estate planning.

Be aware, however, that a solid business appraisal by a qualified valuation expert is necessary to avoid potentially disastrous tax consequences down the road. The price of their report is usually a bargain compared to the alternative. Consult your CPA firm's tax specialist or your tax attorney for details on how to best use these new rules.

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