{"id":6687,"date":"2023-10-02T08:00:00","date_gmt":"2023-10-02T16:00:00","guid":{"rendered":"https:\/\/huddlestontaxcpas.com\/?p=6687"},"modified":"2023-10-02T21:37:49","modified_gmt":"2023-10-03T05:37:49","slug":"why-entrepreneurs-dont-switch-to-s-corp","status":"publish","type":"post","link":"https:\/\/huddlestontaxcpas.com\/blog\/why-entrepreneurs-dont-switch-to-s-corp\/","title":{"rendered":"Why more entrepreneurs do not switch from a sole proprietorship to an S corp"},"content":{"rendered":"\n

S corporations offer a number of advantages over sole proprietorships (visit our tax calculator<\/a> to test it yourself), including the ability to avoid self-employment taxes and limited liability protection. However, many small business owners do not bother restructuring, but why?<\/p>\n\n\n\n

There are a handful of reasons, you wouldn’t do this:<\/p>\n\n\n\n

Cost:<\/strong>\u00a0There is a cost associated with setting up and maintaining an S corp. You will need to file additional paperwork with the IRS and you may<\/em> need to pay additional state taxes.<\/p>\n\n\n\n

This is of course, relatively minor, but given that most entrepreneurs are always on the go and in mid-flight, many don’t bother with yet another stack of papers to fill out.<\/p>\n\n\n\n

Complexity:<\/strong>\u00a0S corporations do tend to be more complex than sole proprietorships. You will need to keep more detailed records and should hire a professional accountant.<\/p>\n\n\n\n

This isn’t just an upsell of course, but makes for yet another reason many don’t switch to an S Corp. Hiring a CPA or accountant — even on an “as needed” basis — tends to pull away from entrepreneur’s time on the business. Growth is paramount, and hiring a CPA can appear<\/em> like a lateral business decision. The reality however is a CPA can do more to increase your business’s profitability.<\/p>\n\n\n\n

Lack of awareness:<\/strong>\u00a0Many small business owners are not aware of the benefits of an S corp. They may not realize that they can save money on taxes<\/a> by switching to an S corp.<\/p>\n\n\n\n

Eligibility requirements:<\/strong>\u00a0There are certain eligibility requirements for S corporations. For example, you cannot have more than 100 shareholders, and all shareholders must be individuals, estates, or trusts. Of course, for most business owners currently operating as a sole proprietorship, this is extremely unlikely.<\/p>\n\n\n\n

A CPA can help<\/h2>\n\n\n\n

If you are a small business owner and you are considering switching to an S corp, it is important to talk to a tax professional. A CPA can advise you on the pros and cons of switching to an S Corp. They can also prepare the necessary paperwork with the IRS. <\/p>\n\n\n\n

Work with one of our CPAs<\/a>, so we can help you understand the costs and benefits of switching, and determine if you qualify.<\/p>\n\n\n\n

Image by StartupStockPhotos<\/a> from Pixabay<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

S corporations offer a number of advantages over sole proprietorships (visit our tax calculator to test it yourself), including the ability to avoid self-employment taxes and limited liability protection. However, many small business owners do not bother restructuring, but why? There are a handful of reasons, you wouldn’t do this: Cost:\u00a0There is a cost associated […]<\/p>\n","protected":false},"author":2,"featured_media":6688,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"","footnotes":""},"categories":[19],"tags":[],"class_list":{"0":"post-6687","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-small-business","8":"entry"},"_links":{"self":[{"href":"https:\/\/huddlestontaxcpas.com\/wp-json\/wp\/v2\/posts\/6687","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/huddlestontaxcpas.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/huddlestontaxcpas.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/huddlestontaxcpas.com\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/huddlestontaxcpas.com\/wp-json\/wp\/v2\/comments?post=6687"}],"version-history":[{"count":1,"href":"https:\/\/huddlestontaxcpas.com\/wp-json\/wp\/v2\/posts\/6687\/revisions"}],"predecessor-version":[{"id":6689,"href":"https:\/\/huddlestontaxcpas.com\/wp-json\/wp\/v2\/posts\/6687\/revisions\/6689"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/huddlestontaxcpas.com\/wp-json\/wp\/v2\/media\/6688"}],"wp:attachment":[{"href":"https:\/\/huddlestontaxcpas.com\/wp-json\/wp\/v2\/media?parent=6687"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/huddlestontaxcpas.com\/wp-json\/wp\/v2\/categories?post=6687"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/huddlestontaxcpas.com\/wp-json\/wp\/v2\/tags?post=6687"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}