How to form an S-corporation for Beauty

Introduction

Beauty is a growing industry, and an S-corporation is a great way to grow your business. Here’s how to form an S-corporation for beauty.

what is an s corporation?

It is a form of corporation that’s taxed like a partnership and offers limited liability protection to the owners.

The IRS considers an S corporation to be a pass through entity. This means that income passes through the business directly to its shareholders, who then pay taxes on it at their individual tax rates. As an added bonus, these profits are not considered separate from the owner’s personal income for purposes of calculating Medicare Part B or Social Security benefits, so they don’t have to pay extra taxes on them later in life.

The benefits of being able to take advantage of this pass-through entity.

S corporations aren’t just for lawyers and doctors

S corporations are an excellent choice for small business owners who want to limit their taxes and protect their personal assets from creditors. If you’re thinking of starting a business or have already started one and want to keep your personal assets separate from the company’s, an S corporation may be right for you.

Benefits of an S-corporation

• Lower tax rates and self-employment taxes
• No double taxation
• Limited liability protection for your business assets and personal assets
• Pass through income. This means you don’t have to pay taxes on profits made by your company, but rather your corporation will pay the corporate tax rate on its profits, which is much lower than individual income tax rates. You then get to keep that money after expenses are paid and pay yourself a salary or dividend as profit distribution. So if you were making $100,000 per year before forming an S-corporation, your new salary would be less than half of that amount—but more than likely it will be higher because there are so many more ways to reduce taxable income!

Create a separate business entity

An S corporation is a tax classification for private businesses that allows them to avoid double taxation and pass corporate profits directly to shareholders. It requires less paperwork than other forms of incorporation, is easy to set up and maintain, and can help you limit your liability as an owner. If you’re employing contractors or freelancers, this is especially important since those people are not technically employees of your company.

Separate personal and business assets

As an S-corporation, your business and personal assets are separate. To keep them that way, you must set up a strong barrier between the two so there is no confusion as to which account is being accessed or used at any given time.

Separate bank accounts are best—in fact, it’s a good idea to open two different accounts: one for your corporation and one for you personally—but this isn’t mandatory if you don’t want to do so. Just be sure that when paying yourself and other employees, everyone knows whether the money is coming from their paycheck or yours as an owner of the company; if there’s any confusion about which account it came from, then write out an explanation on their check stubs before handing them over so nothing gets mixed up with each other later on down in accounting time!

Hold annual meetings

Annual meetings are important to keep your business above-board. They provide a forum for you and your employees to discuss the current state of affairs at the company, including revenue projections and employee evaluations. You should hold an annual meeting with all shareholders and directors within 120 days after the end of each fiscal year.

In addition, you’ll want to be sure that any changes in corporate structure, such as adding new shareholders or directors, is reflected on official documents like articles of incorporation. To do this, simply file the appropriate form with your secretary of state’s office—and don’t forget to send out invitations!

Keep your corporate records up to date

• Make sure that you keep good records.
• Keep a file for each year, and update it regularly. You should also keep tax records for at least 7 years. You’ll want to save legal documents like your business license, corporate minutes, and lists of shareholders or members of whom you took money from or gave some other type of benefit.

It’s fairly easy to form an S-corp, but you should have help from an attorney or accountant if you don’t know this stuff already

We’re going to talk about the advantages of forming an S-corporation. First, you can do it yourself; it’s not difficult to form one and you don’t need help from an attorney or accountant. It saves money compared with other types of business structures because there are no filing fees for an S-corp.

A Small Business Administration guide states that “S corporations are used extensively by small businesses, which often want limited liability protection but also want to pay no federal income taxes at the corporate level. This allows them to pass through profits directly onto their shareholders as dividends without having to pay any tax on those profits at all. In addition, any losses incurred by the company flow directly through to their shareholders, who may then use these losses against profit earned in other investments or other sources of income…”

Conclusion

There you have it—the basics of forming an S-corporation. It’s not a complicated process, and it can be done with the help of an attorney or accountant. If you’re looking to grow your beauty business, an S-corp is a great way to do it!