"Please explain what is the tax advantage of an 'S' corporation."

December 5, 2005
From a tax point of view, generally an 'S' corporation only pays tax on the profits and not on the withdrawals, unlike a 'C' corporation which pays a tax on the profit AND the stockholder pays on the dividend withdrawals. Sole proprietors; limited liability companys (LLC); and partnership income is generally subject to self-employment taxes. 'S' corporations don't pay any self-employment taxes on the profits, however the Internal Revenue Service does expect the owners to pay a "reasonable" compensation for services provided to the corporation by the owners. Pictured above is my wife at a small village in Tortola, British Virgin Islands. Henry (CEO)